FATF has published a report giving guidance to regulators and firms on how to determine whether a digital ID is an appropriate CDD tool. The report looks at how digital ID systems work, and what their key features are, and then looks at the main FATF requirements and how the use of digital ID can fit into the risk based approach. The key element is that there must be identity proofing and enrolment with binding, together with effective authentication.
FATF recommends that government authorities develop clear guidelines allowing appropriate, risk-based use of reliable, independent digital ID and assess how the use of digital ID fits into current systems and risk assessments. Regulated firms are encouraged to understand the basic components of digital ID systems and take a risk-based approach to relying on them – and also consider how to treat systems that have different levels of assurance.