FinTechs belonging to this category provide identification services, which are required for most banking services.
Attitude of the country towards identification services
As the methods of financial technology are radically evolving, the need for identity verification solutions have arised to ensure that identity theft and fraud risks are protected against. Failing to embrace the benefits of remote, digital identity verification can also be damaging to customer adoption and retention rates. Publicly, there are some concerns regarding the extent to which identification systems are capable of stopping theft and fraud in banking/non-banking online transactions.
Obligations and requirements to provide identification services
As per article no. (8) of the Anti- Money Laundering Law, Financial Institutions are obliged to establish systems that ensure the obtaining of information on the identification and legal status of their customers as well as the beneficial owners, whether natural or legal persons, through official or acceptable customary verification means, and to register the information concerning such identification.
Financial Institutions are obliged to keep records and documents for local and international financial transactions containing sufficient information for identifying such transactions; and they should maintain these records and documents and the registers for customers and beneficiaries’ information referred to in Article (8) of this Law, for a period of no less than five (5) years from the date the transaction is finalised with the Financial Institution, or from the date of closing the account, as the case may be, and to periodically update such records and documents and put them at the disposal of the judicial authorities, and the relevant entities for the enforcement of this Law, when required, during the examination, enquiry, collection of indications , investigation or trial concerning any of the crimes subject to this Law.
Financial Institutions may during the period referred to above maintain microfilm copies instead of originals, and such copies shall be admissible and have the same legal effect as originals in matters related to evidence if prepared, maintained and retrieved in accordance with the unit’s rules.
FinTech-related identification services do not require a separate license. They usually come as a part of the services provided by banks and other financial institutions – e.g., technical payment aggregators and payment facilitators. Moreover, in an obligatory form, the CBE has nominated such services on various occasions.
Regarding the use of new technology means, the KYC rules stated by the CBE stipulate that banks must designate policies and internal procedures in order to limit the risks of banking transactions and services that occur through using advanced technology means such as electronic payment cards of different sorts. Needless to say, identification (Digital Registration) in such cases is the number one protection tool against theft and fraud.
As per the Due Diligence Procedures for customers of prepaid cards, CBE has set the rules regarding customer identification and verification. The bank shall be responsible for the management of risks related to money laundering and financing terrorism concerning the provision of the service, which may include, as deemed necessary, obtaining any additional information or documents not mentioned in these procedures or applying Bank Customer Due Diligence Procedures, according to the risks evaluated by the bank for each customer, separately. The bank shall not provide this service to unknown persons or persons who apparently have fake names. Customer identification and verification shall take place using original documents, or information and data taken from original sources that are both reliable and independent. An exception to the application of customer identification and verification procedures, shall be granted to customers whom the bank already subjected them to Bank Customer Due Diligence Procedures, unless the bank has doubts with regard to the accuracy of the data previously obtained thereby, or believes that such data is insufficient and needs to be completed.
Additional comments regarding the legal situation for identification services or what FinTech’s must be aware of in this business area
Market size for identification services and biggest companies in this business area
As per the CBE’s rules and the Anti-Money Laundering Law, banks are obliged to verify customers’ identities either online or in branches and keep records of their information for a certain period. In connection to FinTech, identification services form an integral part of the financial services provided, such as the online registration process in banking apps and online payment service apps.
Additional comments regarding the economic situation for identification services or what FinTech’s must be aware of in this business area