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Electronic checks mooted under FSA proposals for relaxing customer ID rules

14 October 2004  |  4549 views  |  0 cash - pile of dollars

The UK's financial watchdog is proposing a relaxation of customer ID rules for anti-money laundering, including the acceptance of electronic verification checks.

Porposals to scale back the current regime for customer ID checks are contained in a progress report from the Financial Services Authority's ID working group, which has been investigating the issue with the participation of law enforcement, consumers and the industry. The group was formed to address customers' lack of support for the process - which demands the reproduction of two distinct forms of ID when opening new accounts - and firms' concerns over costs.

Philip Robinson, financial crime sector leader at the FSA, says: "We believe that it is crucial to the effective fight against all crime, not just financial crime, that key anti-money laundering controls, such as verification of ID, have the support of industry and customers. All agree that there are ways to streamline the regime without reducing its effectiveness."

He says discussions in the group indicated that the provision of a second document gives limited additional corroborative value. For example utility bills can be easily forged and a large number of customers do not receive a utility bill in their own name. On this basis, either a passport or a photocard driving licence should meet the need in the case of a majority of customers.

The group also recognised that electronic verification - which involves confirming identity via a credit reference agency - can be used instead of, or in addition to, documentary evidence. This would be particularly useful for non-face-to-face customers, says the group, because they do not need to provide documents unless the firm considers it is necessary, it can be cheaper than the documentary approach.

Other possile changes include reliance on ID checks performed by other firms and the need for a more tailored approach for non-personal customers and wholesale business. This would help combat concerns that the current ID checks for non-personal customers are "disproportionate and insufficiently risk based", says the watchdog.

The change in tone has been welcomed by UK private client representative body Apcims. Chief executive, Angela Knight says: "This is a good step forward. Not surprisingly many people have found it unacceptable to have to produce a passport and utility bill not just once but several times. By recognising electronic checking this should result in a much less intrusive regime for the innocent customer, less paperwork for a financial firm and so result in more attention being paid to combating fraud and financial crime."

A consultation draft incorporating the new guidance notes will be issued by the end of this year says the FSA.

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