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Lawyer: Estonia has removed the biggest drag on the financial sector

Адвокат: Эстония устранила самый большой тормоз финансового сектора

In an almost imperceptible change, Estonia this summer relaxed one of the main requirements that has plagued all financial sector companies for years. In particular, amendments to the law significantly relaxed the requirements for software used for remote identification of people. Finance. Illustrative photo Finance. Illustrative photo Photo: Shutterstock

In an almost imperceptible change, Estonia this summer relaxed one of the main requirements that has plagued all financial sector companies for years. In particular, amendments to the law significantly relaxed the requirements for software used for remote identification of people.

Hedman lawyer Vladislav Linko explained that Estonian financial institutions are required to identify the client’s identity if the transaction amount exceeds 15 thousand euros for an individual and 25 thousand euros for a legal entity, or if the client is located outside the European Economic Area.

“For remote identification, companies had to use only software that complied with EU requirements along with a digital identity document. However, this was only theoretically possible, since each country uses its own software to identify individuals. At the same time, not all EU countries have implemented ID card recognition software,” Linko said.

The situation was complicated if the client had to be identified outside the European Union, which, according to Hedman's lawyer, made digital verification almost impossible.

In addition, even with suitable technology in place, Estonia has imposed additional requirements for personal identification and data verification. “Among other things, it was mandatory to have a real-time interview with every potential client,” Linko gave an example of the requirements that had been in effect until now.

Good news for Veriff

The change in the law now allows the financial sector to use technological solutions already available on the market, but previously not meeting the requirements, offered by, for example, Veriff and Sumsub, for remote identification of clients, and proprietary software can also be used. It must meet only three requirements:

1. Remote identification technology must provide sufficient assurance that the personal data and documents provided by the client are correct.

“Essentially, this means that with remote identification it must be possible to identify that the client is personally involved in the identification and is not using the prohibited assistance of a third party for this purpose. In practice, this means, for example, identification using video, where you can see the identity document and the person himself,” Linko explained.

2. Data collected for identity verification must be of sufficient quality and must be maintained in such quality.

3. Identification software must interrupt the identification process if the Internet connection between the person and the software is interrupted.

“For example, if an automated solution is used to identify a person, the program should automatically interrupt the check if the quality of sound or image for some reason becomes insufficient,” Vladislav Linko clarified.

Thus, the amendment to the law significantly expands the possibilities for identifying clients and allows the use of all kinds of solutions that meet the given criteria. However, local companies must also take into account European Union legislation, including the new anti-money laundering regulations for companies operating in the EU.

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