FATF guidance on digital ID

The Financial Action Task Force (‘FATF’) issued, on 6 March 2020, guidance (‘the Guidance’) on digital identification (‘ID’) aiming to help governments, financial institutions and virtual asset service providers to determine whether digital ID is appropriate for customer due diligence.

In particular, the Guidance aims to, among other things, help government agencies, including data protection authorities and cybersecurity authorities, develop a clearer understanding of the digital ID system’s technology, and to clarify how digital ID systems can be used under the global anti-money laundering and countering the financing of terrorism (‘AML/CTF’) standards. In addition, to determine whether a digital ID is suitable, governments, financial institutions and other stakeholders should, firstly, understand the assurance levels of the digital ID system’s technology, architecture and governance and, secondly, determine whether the same is an adequately reliable and independent mechanism in light of any risks of it being used to facilitate illicit finance operations.

Moreover, the Guidance notes the possibility of digital ID authentication for authorising account access to enable regulated entities to capture additional information, such as geolocation, IP address, or the identity of the digital device used to conduct transactions. Furthermore, the Guidance recommends the assessment of existing digital ID assurance frameworks and technical standards adopted by data protection and cybersecurity authorities.