FATF Guidance on Digital Identity (March 2020)

Summary

This is FATF's Guidance on Digital Identity (March 2020), reproduced by the BVI Financial Services Commission as guidance material. It explains how digital ID systems can be used to satisfy customer due diligence (CDD) requirements under FATF Recommendation 10, and is explicitly described in the text as non-binding, clarifying existing FATF Standards rather than creating new legal rules.

• Purpose: Helps governments and regulated entities assess whether a digital ID system is sufficiently reliable and independent to be used for identifying and verifying customers under a risk-based approach.
• Key concept: Non-face-to-face identification using a reliable, independent digital ID system with appropriate risk mitigation may be treated as standard risk, or even lower risk, rather than automatically higher risk.
• Decision process: Sets out a two-step approach: (1) understand the assurance levels of the digital ID system's technology, architecture and governance; (2) make a risk-based judgment on whether those assurance levels are adequate given the ML/TF, fraud and other illicit finance risks involved.
• Scope of 'regulated entities': Covers financial institutions, virtual asset service providers (VASPs), and designated non-financial businesses and professions (DNFBPs) to the extent DNFBPs must conduct CDD under Recommendation 22.
• Recommendations to authorities: Encourages governments to develop or revise CDD guidance/regulations to accommodate digital ID, adopt principles/outcomes-based criteria for proving identity, coordinate across AML/CFT, data protection and identity authorities, and consider regulatory sandboxes for testing digital ID solutions.

Because the document states it is non-binding guidance clarifying existing FATF Standards rather than imposing new legal requirements, it does not itself create enforceable obligations or deadlines for BVI-regulated entities; any binding effect would depend on how the FSC or BVI legislation separately incorporates this guidance into local AML/CFT rules.

Applies to

financial institutions, virtual asset service providers (VASPs), designated non-financial businesses and professions (DNFBPs)