AML5: The new Anti-Money Laundering Directive

The AML5 Directive is the new European regulation for Anti-Money Laundering and counter Terrorism Financing purposes that came into force on 9 July 2018. This Directive drastically changes this concept, creating a unique digital space for client identification in the financial sector.

Until today, the legislation for the identification of online clients in the financial sector has been very fragmented: Each country was independent, and their central banks were the ones who regulated this technology.

Since today, your financial entity can enjoy the access to 508 million of citizens to offer financial services in the secondary international market, with 20 billion of Euros in GDP.

eID counts with the first solution that allows the identification of clients by video in less than 30 seconds, fulfilling with the high security level required in the process to open accounts.

What was there before AML5 directive?

Until today, even though many good transborder practices already existed such as FATF/GAFI, the legislation depended on the local regulators, that needed authorization of the procedures of identification non-essential, to allow banks to digitalize the process of client identification

But when Germany (BaFin as AML regulator) lead the first authorization of a “procedure of identification for non-present clients”, we know 6 more-member states (Switzerland, Spain, Luxemburg, Portugal, and Italy) that followed and have done the same. All of them have in common that they trusted video technology to reach this level equivalent to technic security and essential face to face identification.

Why are image or selfies solutions being not compliant?

The North American creators of identity verification had some confusion with the departments of compliance with their “selfies” solutions.

However, with time, the most prestigious analyst has achieved the recompilation of information regarding the regulation at the international level. Of course, they decided that, in no case whatsoever, for a process KYC/CDD, a solution of images legally complies with the requirements of purchasing products of high risk, such as the opening of new bank accounts, the purchase of life insurance or 401ks, where the technology streaming end-to-end is mandatory.

If you want to know more about this you can check out this article.

AML5 directive and eIDAS regulation

AML5 facilitates financial companies to offer their services in a unique digital market with 508 million of consumers. Eliminating the barriers to make business in multiple industries and markets, where a high fragmentation used to exist before the implementation of this new legislation.

Europe is the second market of the world with 20 trillion of dollars in GDP, ahead of the U.S.A. and closing in the Chinese economy.

The main novelty of AML5 is that introduces different sections referring to client identification, the European regulation of trust services 920/2014, commonly known as eIDAS and it delegates in it, and in the trust electronic services. The capacity to identify new clients in any member state.

eIDAS was implemented in July of 2016 and counts with an electronic baggage and good practices of solutions for electronic identification and needed framework of technical work for the validation of solutions. As an example, it counts with good practices for the first identification of clients, with three security levels: low, substantial, and high.

The importance of eIDAS

With eIDAS regulation, the European Commission created the concept of “Unique Digital Market”, homogenizing the electronic identification of solutions for Europe, which will bring a huge efficiency in the relations between member states in all industries, and, to the movement and the use of financial services for the consumer. What makes AML5 innovative is that it introduces effectively for first time in the industry, in this case the financial.

With norms such as PSD2, AML5, eIDAS, or GDPR, Europe is becoming pioneer at global level in financial regulation, allowing the sector to take advantage of the opportunities that brings with itself the disruption of the financial system.

How can eID help you after the liberation of AML5?

Our company welcomes this fantastic news for the financial entities that are planning in a communitative strategy. As the leader company in solutions of video identification, eID comes working since a long time in this opportunity:

  • We count with the patented VideoID technology, that complies with the requirements for the highest security level: A qualified international laboratory has evaluated our product VideoID with the highest security level.
  • We count with a mix of documents called “Kit AML5”, which allows us to adopt the norm in a very simple way, helping the business and its departments realize the necessary work: Risk analyze, qualification and adoption of the norm for the beginning of production and acquire new clients in record time.

AML5: The new Anti-Money Laundering Directive

Copyright © 2018 RegTech Analyst

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