FATF: Guidance on Digital ID

108

The Financial Action Task Force FATF estimated a 12.7% annual increase in digital transaction rate. It has, therefore, developed guidance that will help governments, financial institutions, virtual asset service providers and other regulated entities determine whether a digital ID is appropriate for use for customer due diligence since traditional verification tools are not applicable. FATF also emphasized the importance of know-your-customer policy as a vital tool to ensure that funds under the transaction are not associated with crimes.

The emergence of the digital ID is a great advantage to the financial sector; it makes it easier, cheaper, and more secure to identify individuals in the financial sector and can also ensure a significant control of human measures. Besides, it can also allow individuals without a traditional identification to have a robust form of identification to access financial services and improve financial inclusion. Therefore, to determine whether a digital ID is suitable, governments, financial institutions and other stakeholders should:
Understand the assurance levels of the digital ID system’s technology, architecture and governance
Given its assurance levels, determine whether it is appropriately reliable, independent in light of potential risks that it is used to facilitate illicit finance