Armin Bauer, Co-Founder & Chief Technology and Security Officer at IDnow, explains all about the German Federal Ministry of Finance’s new draft bill on the Money Laundering Video Identification Ordinance (GwVideoIdentV), what the amendments would mean for banks and financial service providers, and why IDnow has been driving these developments for years and welcomes the revisions.
Germany is lagging behind in its digital transformation efforts compared to the rest of Europe, despite its technological expertise. For example, as the first country to accept video identification procedures, Germany took on a pioneering role, but has subsequently lost this position due to its inactivity and inability to approve successor solutions at national level.
The current basis for video identification in the banking sector continues to be rules contained in the Circular (“Rundschreiben”), which was issued by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) in 2017.
There have been few updates to video identification procedures in the German financial sector in recent years, with automation, modernization and user-friendliness all seemingly often in competition with security concerns. There were also inklings from Berlin that coordination on the GwVideoIdent regulation was tough.
However, an exciting breakthrough came in mid-April 2024: the Federal Ministry of Finance published the draft bill for the ordinance on money laundering identification by video identification.
What changes does the draft envisage?
- Classic VideoIdent procedures are now to be regulated by ordinance, and no longer just by the BaFin Circular from 2017.
- Companies whose services and products fall under the Money Laundering Act (GWG) and which use the existing VideoIdent procedure must offer mandatory identification using the German online ID function (German ID card with activated online function and NFC-enabled smartphone, eID for short) in addition to other solutions. According to the draft, this must be equivalent to other procedures: “In particular, providers must not deliberately mislead the person to be identified into preferring the video identification procedure via the user interface design”. The draft will create more use cases for the electronic ID card (eID) in the financial sector. The spread of the online ID function among the population is expected to increase. According to a PwC study, only seven percent of Germans would decide against using eID, while 70 percent are prepared to use the online ID card for transactions with banks and in legal matters.
- Partially automated procedures for identity verification are to be permitted. Partially automated means that parts of the identification process can in the future be automated, but there are still parts that may not. In addition, a direct (not downstream) check by a human must be part of the verification process. IDnow’s “VideoIdent Flex” solution offers a clever combination of AI-supported, expert-led identity verification.
- Fully automated solutions for identity verification could also be approved for up to two years, subject to certain requirements (equivalence to a human check) – after a maximum six-month registration phase for testing under the supervision of the BSI (Bundesamt für Sicherheit in der Informationstechnik, Federal Office for Information Security). The BSI retains the final decision power regarding approval.
How IDnow became a pioneer for secure and intuitive identification processes in the financial sector.
IDnow presented the idea of partially and fully automated video identification to the Ministry of Finance back in 2020. We therefore welcome the fact that legislation is now to follow the existing technical possibilities and that further identification procedures are to be approved. IDnow’s fully automated process has been setting industry standards for a long time, is certified in accordance with various industry standards (e.g. ETSI TS 119 461) and is already used for money laundering-compliant identification in other European countries.
Since IDnow was founded, the Munich-based IT company has worked closely with regulatory authorities and other market participants to drive progress and always ensure the highest level of security for identity verification. We believe that security does not have to come at the expense of intuitive design and user-friendliness. Our solutions provide customers with secure, reliable and straightforward identity verification processes.
Security, innovation and trust in digital identity management.
IDnow is a leading platform provider for identity verification and a German pioneer in digital applications and innovations – both in sensitive parts of the administration and in highly regulated areas, such as the financial sector.
We offer users a reliable, secure and seamless solution from a single source that meets the relevant regulatory requirements and security levels and protects against misuse, such as fraud, identity theft or forged signatures.
Creating a high level of security and sovereignty in the digital space.
In our view, clear rules and standards for digital identification procedures are the basis for ensuring trust, security and privacy. In fact, secure forms of digital identification can strengthen the sovereignty of citizens in the digital space and in the financial sector.
We have the expertise to meet the diverse range of security requirements, which vary depending on the industry and sensitivity of the use case. Germany must always strive to provide its citizens with the most secure, innovative and usable solutions and play a pioneering role in digitalization – this is what IDnow stands for with its broad portfolio of solutions.
We offer secure and powerful identity verification and fraud prevention solutions, including:
- Automated identity verification (AutoIdent, AI-supported and GwG-compliant),
- Video verification solutions (VideoIdent, a GwG-compliant verification with high security requirements via video chat, supported by AI technology; and VideoIdent Flex, a customizable version),
- Chip-based identity verification, utilizing the German electronic ID card (eID) and NFC-enabled smartphones.
By
Armin Bauer
Chief Technology and Security Officer at IDnow
Connect with Armin on LinkedIn
