February 19, 2018

Switzerland's FINMA wants to increase security standards for online identification

FINMA, the Swiss Financial Market Supervisory Authority, wants to adapt the regulations for video and online identification. The identification experts, IDnow and Intrum AG, welcome the planned security-enhancing adaptations of this popular process and are once again assisting the FINMA in an advisory capacity.

Barely two years ago, the FINMA circular 2016/7 "Video and Online Identification" came into force. Taking into account the practical experience to date, and technological progress since then, the Swiss Financial Market Supervisory Authority, FINMA, is now conducting a consultation up to 28 March in order to adapt the regulations accordingly. The pioneering identification providers, IDnow and Intrum, welcome this intention as an important further step to increase the security of online identification.

Planned innovations for both processes

As things stand at the present, there should be during both processes a verification of the identity document using at least three randomly selected optical security attributes and a comparison made "with references from an identity document database with regard to security attributes, character type, as well as size and layout." However, in the case of the identification via electronic identity document copy, only those security attributes which can be verified on a still image are taken into consideration. Moreover, the TAN is not required for either processes, and the identification process may still be continued even when there are warnings concerning increased risks.

Reviews for online identification

The changes regarding online identification using an electronic identity document copy are of particular interest for the finance sector. Initially, the FINMA only wants to allow recordings in a specific image quality. Furthermore, only identity documents which have an MRZ (Machine Readable Zone) and optical security attributes, such as holographic, kinematic attributes, or printed elements, will now be accepted as proof of identification. In addition to this, during online identification liveness detection will be required to ensure that the user's photograph has been created within the framework of the identification process.

Increased security through technology

The cooperating identification experts, IDnow and Intrum, welcome the revision as an "important setting of the course for a KYC process ready for the future", since security in online identification will thereby be considerably increased without limiting user friendliness. Many of the new features have proved themselves in practice as an effective measure for the prevention of fraud. In particular, the random selection of security attributes and a higher image quality scare off fraudsters beforehand, given that this makes the technical requirements for forgery (particularly with regard to the holographic, kinematic attributes) increase many times over. The security level is also increased considerably with the identity document test using a database reconciliation. IDnow has developed an intelligent software specially for this, which also detects the most minor deviations from the standard accurately, and can therefore significantly reduce the risk of fraud. This semi-automatic check also has the advantage that the identification process is considerably accelerated.

More control

As far as IDnow and Intrum are concerned, the fact that the identification process will not have to be aborted in the future, even when there are increased risk warnings, is indeed already a step in the right direction. However, it does not yet go far enough in the sense of sustainable fraud prevention. Experience with video identification has shown that in the long term it pays off not to abort the identification process, even in the case of suspected fraud. First of all, no data is lost that afterwards serve as valuable sources of analysis and secondly, fraudsters are unable to ascertain the weak points in their forgery. To this end, specially trained staff are of course required who can professionally take the users through the identification process accordingly. On the contrary, in the case of online identification via electronic identity document copy, there is no direct exchange between users and inspectors. It is here where liveness detection is required as a new security measure. Nowadays, the corresponding processes already offer the security of differentiating between a real person and recordings of a person.

In light of rapid technological advances, the identification duo believes there is still potential for regulatory readjustment for online identification via electronic identity document copy in order to make this process even more secure. However, even in this regard, IDnow and Intrum consider the future as being more than optimistic, and continue to pursue their constructive exchange with the FINMA. Ultimately, all sides want to optimise the regulatory standards both with regard to Swiss competitiveness and user friendliness.

You can find the current draft of the FINMA circular 2016/7 "Video and Online Identification" here.

About IDnow GmbH
IDnow provides the world’s most advanced machine-learning technology for its Identity-as-a-Service platform that can verify in real time the identities of more than 7 billion people from 193 different countries. Our patent-protected video identification and e-signing solutions help our clients save money, improve customer conversion rates and streamline the onboarding process. We are backed by the venture capital investors BayBG, Seventure Partner, G+D Ventures and Jet A and a consortium of well-known business angels. Founded in 2014, we already count a large and fast growing team of 300, making us one of Europe’s fastest growing fintechs. Clients are leading international blue chip companies such as Commerzbank, UBS, Sixt, Erste Bank and Telefonica Deutschland, many fintechs like Fidor, N26 and smava as well as many blockchain-based companies. IDnow was awarded “Most Successful Fintech” in 2017.

Further information available at www.idnow.io.