FINMA Circular 2016/7 on Video and Online Identification for Client Onboarding

Laupenstrasse 27, 3003 Bern Tel. +41 (0)31 327 91 00, Fax +41 (0)31 327 91 01 www.finma.ch Circular 2016/7 Video and online identification Due diligence requirements for client onboarding via digital channels Reference: FINMA Circ. 16/7 "Video and online identification" Date: 3 March 2016 Entry into force: Last amendment: 8 March 2016 6 May 2021 [Modifications are indicated by an asterisk * and are listed at the end of the doc￾ument.] Legal framework: FINMASA Article 7 para. 1 let. b AMLO-FINMA Article 3 para. 2 Adressees BankA ISA FinIA FinMIA CISA AMLA Other Banks Financial groups and congl. Persons under Article 1b BA Other intermediaries Insurers Insurance groups and congl. Intermediaries Portfolio managers Trustees Managers of collective assets Fund management companies Investment firms (proprietarian trading) Investment firms (non propriet. trading) Trading venues Central counterparties Central securities depositories Trade repositories Payment systems Participants SICAVs Limited partnerships for CISs SICAFs Custodian banks Representatives of foreign CISs Other intermediaries SRO SRO-supervised institutions Audit firms Rating agencies X

Index 2/14 I. Subject matter and purpose Margin no. 1 II. Scope of application Margin no. 2–4 III. Video identification Margin no. 5–28 A. Video identification on a par with in-person identification for individuals Margin no. 5–22 B. Video identification of legal entities or partnerships Margin no. 23–26 C. Video identification on a par with in-person identification for client onboarding involving more than one contracting party Margin no. 27 D. Documents equivalent to a simple copy of an identification document for client onboarding by correspondence Margin no. 28 IV. Online identification Margin no. 29–44 A. Documents equivalent to a simple copy of an identification document for client onboarding by correspondence Margin no. 29–30 B. Online identification by electronic copy of an identification document Margin no. 31–44 V. Declaration of beneficial ownership Margin no. 45–50 A. Qualified electronic signature on online form Margin no. 47 B. TAN procedure or similar methods Margin no. 48 C. Electronic transmission of the signed form Margin no. 49–50 VI. Involvement of third parties Margin no. 51 VII. Abrogated Margin no. 52 VIII. Technological neutrality Margin no. 53 IX. Abrogated Margin no. 54

3/14 I. Subject matter and purpose FINMA has issued this circular in application of Article 3 para. 2 of the FINMA Anti-Money Laundering Ordinance (AMLO-FINMA; SR 955.033.0) for the interpretation of the due dili￾gence requirements of the Anti-Money Laundering Act (AMLA; SR 955.0) and its implement￾ing provisions on the digital provision of financial services. 1 II. Scope of application This circular applies directly to financial intermediaries as defined in Article 2 para. 2 AMLA. 2 The following references to AMLO-FINMA relate to the analogous provisions of the Agree￾ment on the Swiss banks’ code of conduct with regard to the exercise of due diligence (CDB) and the regulation of the Self-Regulatory Organisation of the Swiss Insurance Association (SRO-SIA). 3 References to this circular in SRO regulations become valid as of the entry into force of the circular. Any SRO regulation which differs from this circular will be dealt with through the regular approval process. 4 III. Video identification A. Video identification on a par with in-person identification for individuals Video identification has equal validity to in-person identification, provided the following criteria are met: 5 a) Technical and organisational requirements Identification is to be made via audio-visual real-time (live transmission) communication be￾tween the contracting party1 and the financial intermediary. The financial intermediary utilises adequate technical equipment to ensure the secure video transmission as well as the reading and decryption of the information stored in the identification document's machine-readable zone (MRZ). 6* 1 For the purposes of this circular, "contracting party" shall also include third parties of full age who open a client relationship for minors.

4/14 The picture and audio quality must be adequate to enable unambiguous identification. The financial intermediary can use technical aids to compensate for poor lighting, especially when taking the photographs required for the identification. 7* Specially trained employees at the financial intermediary are responsible for identifying the contracting party. The full duration of the interview must be audio-recorded. 8 The financial intermediary must define a process for conducting the identification interview and a dialogue guide for those employees responsible for video identification. 9 b) Identity verification The video identification process for individuals is set out in margin nos. 11–22. 10 The financial intermediary structures the online onboarding process in such a way that the contracting party fills out the details required under Articles 44 and 60 AMLO-FINMA elec￾tronically and transfers them to the financial intermediary before the audio-visual identification interview takes place. The financial intermediary then reviews the details using appropriate technical tools or by posing targeted questions during the identification interview. At this stage of the process, the financial intermediary is looking for conspicuous behaviour patterns which could indicate that the identification documents are not authentic. In addition, the financial intermediary checks the information gathered during the onboarding process against the in￾formation contained in the contracting party's identification document. 11 The financial intermediary must obtain the contracting party’s explicit consent to conduct the video identification and audio recording before starting the video interview. 12 During the video transmission, the financial intermediary takes photographs of the contracting party as well as of all the relevant pages in the identification document and checks whether the photographs taken during the interview match those in the identification document. 13 The financial intermediary also reviews the authenticity of the identification documents by using a machine to read and decrypt the information in the MRZ and by examining one opti￾cally variable and another randomly selected security feature of the identification document. This can be done by using technical tools or by visual confirmation (e.g. by tilting the identifi￾cation document). The financial intermediary checks that the decrypted information matches the other information in the identification document and the data provided by the contracting party during the onboarding process. If the financial intermediary is not familiar with the iden￾tification document, the latter should be compared with reference documents from an identity document database referring to security features, character type and size, and layout. 14* Only official identification documents issued by the relevant country can be accepted for this process. Moreover, the documents must have an MRZ and optical security features, such as holographic-cinematic marks or printed elements with latent image effects. 15

5/14 Abrogated 16* Each identification process must be documented. The photographs of the identification doc￾ument and contracting party must be filed and archived along with the audio recording of the entire identification process. 17 c) Stopping the video identification process The financial intermediary will stop the video identification process if: 18 • the picture or audio quality does not enable unambiguous identification of the contract￾ing party; or 19* • abrogated 20* • there are any doubts regarding the authenticity of the identification document or the identity of the contracting party. 21 • The identification process can also be stopped and the client asked to use conventional channels (i.e. opening an account in person or by correspondence) instead. If the fi￾nancial intermediary identifies evidence of higher risks, the identification process may be continued. The financial intermediary, however, must ensure that the client is onboarded only when the required approval of a supervisor, a superior or the manage￾ment board has been granted in accordance with Article 18 AMLO-FINMA. 22* B. Video identification of legal entities or partnerships Video identification can be used to onboard legal entities or partnerships provided that the requirements outlined in margin nos. 24–25 and the provisions in Section III.A are met. 23 For contracting parties in the form of legal entities or partnerships, the financial intermediary must obtain an electronic extract either from the database of the relevant registration authority or from a trustworthy privately managed directory. The extract may also be submitted to the financial intermediary outside the video identification process. 24 The financial intermediary takes note of the electronic copy of the power of attorney for the contracting party and checks the identity of the individuals representing the legal entity/part￾nership through the video identification process as described in Section III.A. The identities of the legal entity’s or partnership’s representatives do not all have to be verified at the same time. 25 The financial intermediary may receive the declaration regarding the controlling person elec￾tronically in accordance with the provisions set out in Section V. 26

6/14 C. Video identification on a par with in-person identification for client onboarding involving more than one contracting party Video identification is on a par with in-person identification when onboarding more than one contracting party, provided the procedure outlined in Section III.A and/or III.B is completed individually for each contracting party. 27 D. Documents equivalent to a simple copy of an identification document for client onboarding by correspondence If the requirements outlined in Section III.A to III.C cannot be met in full, the documents gen￾erated electronically during the video identification process have the same validity as a simple copy of an identification document and fall under Articles 45 para. 2, 49 and 59 para. 1 let. d AMLO-FINMA. 28 IV. Online identification A. Documents equivalent to a simple copy of an identification document for client onboarding by correspondence A photograph of the identification document provided by the contracting party is equivalent to a simple copy of an identification document. The photograph can be sent electronically to the financial intermediary for filing. 29 Photographs of identification documents taken as part of the process described in Section IV.B are also equivalent to a simple copy of an identification document, even if not all of the criteria outlined in that section are met. 30 B. Online identification by electronic copy of an identification document Electronic copies of identification documents submitted to the financial intermediary are equivalent to an authenticated copy of an identification document if they are generated through one of the following processes and in compliance with the requirements set out in margin nos. 32-37, 38-39, 40-41 or 42-44. 31 For online identification, the image quality must be suitable to enable correct identification. The financial intermediary can use technical means to compensate for difficult lighting condi￾tions. 31.1* If the financial intermediary identifies evidence of increased risks, the identification process may be continued. The financial intermediary, however, must ensure that the client is 31.2*

7/14 onboarded only when the required approval of a supervisor, a superior or the management board has been granted in accordance with Article 18 AMLO-FINMA. During the identification process, only official identification documents of the respective issu￾ing country serve as proof of identification which have a MRZ and optical security features such as holographic-kinematic features or printing elements with a tilting effect. 31.3* The financial intermediary documents each identification process. The photographs of the identification document and the contracting party and, where appropriate, the qualified elec￾tronic signature must be filed and archived. 31.4* For online identification, the financial intermediary utilises adequate technical equipment to ensure secure transmission of data. 31.5* a) Electronic copy of an identification document authenticated by the financial in￾termediary The financial intermediary obtains photographs of all the relevant pages of the contracting party and its identification document from the contracting party. The financial intermediary verifies that the photograph taken of the contracting party matches the photograph in the identification document. If the financial intermediary is not familiar with the identification doc￾ument, the latter should be compared with reference documents from an identity document database referring to security features, character type and size, and layout.Using appropriate technology, which at least permits the information contained in the MRZ to be read and de￾crypted, the financial intermediary then checks the decrypted information against the other information in the identification document and the data provided by the contracting party dur￾ing the onboarding process. The financial intermediary assesses the authenticity of the iden￾tification document by checking at least two randomly selected security features. The financial intermediary also ensures that the photograph of the contracting party was taken during the identification process. 32* In addition, the financial intermediary or bank2 arranges to receive a payment from the con￾tracting party transferred from an account held in the contracting party’s name at a bank in Switzerland or Liechtenstein. Instead of an account with a bank in Switzerland or Liechten￾stein, an account with a bank in a member state of the Financial Action Task Force (FATF) is also sufficient provided that this country has in its country audit not been rated non-compliant with regard to the recommendations on customer due diligence and wire transfers and low for immediate outcomes 3 (supervision) and 4 (preventive measures). 33* The financial intermediary may dispense with a bank transfer as set out in margin no. 33 if they read the chip embedded in biometric identification documents using adequate technical equipment and if the data, having undergone authenticity and integrity checks, match the information provided and the photograph taken of the contracting party. 33.1* 2 For the purposes of this circular, "bank" shall also include persons under Art. 1b BA.

8/14 The financial intermediary must also confirm the contracting party’s residential address by means of a: 34* • tax invoice or any other official invoice or power, water or telephone invoices (utility bill); 35* • postal delivery; 36 • a public register, or a trustworthy, privately managed database/directory; or 37 • geolocation. 37.1* b) Electronic copy of an identification document with qualified electronic signature The financial intermediary obtains an electronic copy of all the relevant pages of the contract￾ing party’s identification document transmitted electronically by the contracting party and an authentication by means of a qualified electronic signature from a provider of certification services recognised in Switzerland under the Federal Certification Services Act (ZertES; SR 943.03). 38* The financial intermediary checks the information in the identification document against the qualified electronic signature profile. 39* c) Digital authentication The authentication provider as defined in Article 49 AMLO-FINMA can also issue confirma￾tions of authenticity electronically to the financial intermediary. To do so, the provider makes an electronic copy of all the relevant pages of the identification document, inseparably at￾taches a confirmation that its contents match those of the identification document, adds a digital timestamp and an employee signature to the file, and provides it to the financial inter￾mediary. 40* If the authentication provider confirms the identification document's authenticity at the same address which was provided by the contracting party to the financial intermediary during the onboarding process as the contracting party’s place of residence, and if confirmation of au￾thenticity can be verifiably demonstrated from documentation as having been performed at that address, the authentication issued in this way also serves as a confirmation of domicile under Article 45 para. 2 AMLO-FINMA. 41 d) Legal entities and partnerships The financial intermediary requests and verifies photographs of the individuals who are onboarding on behalf of the legal entity/partnership, as described in margin no. 32. 42

9/14 In addition, the financial intermediary or bank arranges to receive a payment from the legal entity/partnership from an account held in the name of the legal entity/partnership at a bank in a country in accordance with margin no. 33. 43* Moreover, the financial intermediary obtains an extract as described in margin no. 24 and the document specifying the power of attorney for the legal entity/partnership. The financial inter￾mediary can obtain the declaration concerning the controlling person electronically in line with the same criteria in Section V below. 44 V. Declaration of beneficial ownership The requirements set out below apply to the declaration regarding the beneficial owner of assets as described in Article 59 ff. AMLO-FINMA as well as to the declaration regarding the beneficial owner in unlisted operational legal entities or partnerships (controlling person) as described in Article 56 ff. AMLO-FINMA. These requirements also apply to the declaration in connection with associations of individuals, trusts and other economic units, as defined in Article 64 AMLO-FINMA, and for the declaration of the policyholder/premium payer. 45 The financial intermediary adds both the declaration and the documentation regarding the contracting party’s confirmation to its files. 46 A. Qualified electronic signature on online declaration form The financial intermediary can obtain the contracting party’s declaration as described in mar￾gin no. 45 by means of an electronic form signed by a qualified electronic signature. 47 B. TAN processes or similar methods Alternatively to a qualified electronic signature, the contracting party can also confirm the declaration using a TAN or similar method, provided it enables reliable attribution to the con￾tracting party (e.g. IP address). 48* C. Electronic transmission of the signed declaration form The financial intermediary can also accept for its records an electronic copy, transmitted elec￾tronically, of a form printed and manually signed as a declaration within the meaning of margin no. 45. The financial intermediary adds to its files the documentation regarding the electronic transmission of the form by the contracting party and compares the signature on the form with that on the identification document. 49 The electronic transfer of the signed form can also take place within the context of an existing business relationship. 50

10/14 VI. Involvement of third parties As set out in Articles 28 and 29 AMLO-FINMA, the financial intermediary may mandate indi￾viduals and companies to identify the contracting party in line with the procedure described in Sections III and IV and to establish the identity of the beneficial owner in accordance with Section V. The financial intermediary verifies in particular whether the person/company in question has the requisite professional knowledge and technology to process the identifica￾tion documents of the relevant countries. The financial intermediary is sent the photo￾graphs/electronic copies, audio recordings, declarations and documentation generated by the third party and files them accordingly. 51* VII. Abrogated Abrogated 52* VIII. Technological neutrality The wording in the following AMLO-FINMA articles extends to the following formats in a digital context: 53*

11/14 Article and wording Explanations and practical examples of the digital format Article 16 para. 1 let. a AMLO-FINMA: The clarifications comprise […] obtaining written or verbal information from the contracting party, the controller or the beneficial owner of the assets. Written information: text-based information re￾ceived electronically (e.g. e-mail, chat etc.) Verbal information: telephone, video confer￾ence Article 28 para. 1 AMLO-FINMA: The financial intermediary may […] man￾date in writing if […] The mandate may also be awarded electroni￾cally, e.g. by digital signature Article 28 para. 2 AMLO-FINMA: The financial intermediary may entrust the fulfilment of these due diligence re￾quirements without a written agreement […] In principle, a written agreement is not neces￾sary. Article 28 para. 3 AMLO-FINMA: Mandated third parties, in turn, cannot use the services of another sub-contrac￾tor. If a financial intermediary uses the services of another financial intermediary and if this party entrusts the video and online identification to a directly mandated service provider, the latter shall not be deemed another sub-contractor and no prohibited further delegation shall take place. Article 29 para. 2 AMLO FINMA: The financial intermediary must add a copy of the documents, which served to fulfil the requirements for the prevention of money laundering and the financing of terrorism, to its files and obtain written Electronic copies of the documents are equiv￾alent to a copy. The confirmation can, for example, also be sent by e-mail or another secure electronic channel (e.g. an upload portal) provided that the identity of the person submitting the copies and the fact that the confirmation is for

12/14 confirmation that these copies are identi￾cal to the original. the copies in question can be shown clearly and unambiguously. Article 45 para. 2 AMLO-FINMA: If the onboarding is initiated without per￾sonal contact, the financial intermediary shall also confirm the address by postal delivery or in some other way which is similarly conclusive […] See Section IV.B. Article 47 para. 1 let. b AMLO-FINMA: […] a written extract from the commercial register database; Electronic files (e.g. PDF and corresponding picture formats) have equal validity to the writ￾ten extracts. Article 47 para. 2 let. c AMLO-FINMA: […] a written extract from trustworthy, privately managed directories and data￾bases. Electronic files (e.g. PDF and corresponding picture formats) have equal validity to the writ￾ten extracts. Articles 56, 57, 58, 59, 60, 61, 62, 63, 64, 74 para. 1 let. b AMLO-FINMA: […] written declaration […] See Section V. Articles 48 and 60 AMLO-FINMA: […] signed […] See Sections IV and V. Articles 12, 29, 45, 48, 49, 74 copy/copies See Section IV.

13/14 Article 74 para. 1 lets. c and d […] a written note […] A written note is also on a par with electronic data such as PDF and corresponding image formats. IX. Abrogated Abrogated

List of modifications 14/14 The Circular has been modified as follows: These modifications were adopted on 20 June 2018 and will enter into force on 1 August 2018. new margin nos. 31.1, 31.2, 31.3, 31.4, 54 modified margin nos. 14, 22, 32, 33, 34, 35, 38, 39, 40, 43, 48, 53 abrogated margin nos. 16, 20, 52 The references and terms were adjusted upon the entry into force of FinIA and FinSA on 1 January 2020. These modifications were adopted on 6 May 2021 and will enter into force on 1 June 2021. new margin nos. 31.5, 33.1, 37.1 modified margin nos. 6, 7, 19, 33, 43, 51, 53 abrogated margin nos. 54 The Appendix to the Circular has been modified as follows: These modifications were adopted on 20 June 2018 and will enter into force on 1 August 2018. abrogated Appendix