CySEC PS-01-2024: Enhancing non-face-to-face customer onboarding

1. Why the shift toward Digital Onboarding?

The global financial sector is increasingly gravitating towards digital solutions to meet the demands of a fast-paced, tech-savvy consumer base. CySEC’s move to enhance NFTF customer onboarding processes aligns with broader international trends where regulatory bodies are encouraging the adoption of innovative technologies to streamline operations while safeguarding against financial crime. The COVID-19 pandemic has accelerated the need for robust remote solutions, highlighting the importance of having a flexible and secure framework for customer due diligence (CDD).

Cyprus, with its strategic location and well-established financial sector, is uniquely positioned to take advantage of these changes. The introduction of this Policy Statement not only brings Cypriot financial institutions in line with European Union standards but also allows them to remain competitive in a global market that increasingly favors digital-first approaches.

2. Key components of the new policy

The Policy Statement on the enhancement of the non-face-to-face customer onboarding process introduces several crucial changes and clarifications aimed at optimizing the use of Remote Customer Onboarding Solutions (RCOS). These include:

• Technological Neutrality: One of the cornerstone principles of the new policy is the emphasis on technological neutrality. CySEC encourages obliged entities to select or combine various RCOS that best fit their operational needs. This approach allows obliged entities to explore and integrate a broader range of technologies, provided they meet the regulatory requirements set forth by the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework and the European Banking Authority (EBA) Guidelines.
• Comprehensive Risk Assessments: Before adopting any new RCOS, obliged entities are required to conduct a thorough risk assessment. This includes evaluating the technology’s effectiveness in mitigating risks associated with money laundering and terrorist financing (ML/TF), testing its reliability, and ensuring it aligns with the entity’s existing compliance frameworks. CySEC has made it clear that while these assessments are mandatory, the responsibility for choosing and implementing the right RCOS lies with the obliged entities, which must notify CySEC of their intended use of these solutions.
• Supervisory Expectations and Compliance: CySEC’s Policy Statement also details the supervisory expectations for obliged entities. While the use of RCOS is strongly encouraged, it does not replace the need for strong internal controls and ongoing monitoring. Obliged entities must incorporate the use of RCOS into their non-face-to-face CDD policies and procedures, ensuring that they remain compliant with all relevant regulatory requirements. Additionally, CySEC requires obliged entities to notify them in advance of implementing new RCOS. This notification serves an informative purpose rather than constituting an official approval.

Contact us at info@salvusfunds.com if you are interested in learning more about the enhancement of non-face-to-face customer onboarding processes with electronic methods.

3. Implications for Cyprus’ Financial Sector

The issuance of this Policy Statement has far-reaching implications for the financial sector in Cyprus. By enabling the adoption of a wide range of digital onboarding solutions, CySEC is fostering an environment where financial institutions can expand into multiple markets while maintaining high standards of security and compliance. This flexibility is crucial in a world where customer expectations are shifting towards more convenient, fast, and secure digital interactions.

For financial institutions operating in Cyprus, this Statement represents an opportunity to enhance their customer onboarding processes significantly. By adopting RCOS, these institutions can offer a more streamlined and user-friendly experience, which is particularly appealing to younger, tech-savvy customers who expect seamless digital services. Moreover, the ability to choose from a variety of technological solutions means that institutions can tailor their onboarding processes to best fit their specific risk profiles and operational models.

4. Steps forward: Implementing the new Policy 

Financial institutions in Cyprus shall approach the implementation of this new policy with careful planning and consideration. The first step is to review and understand the detailed guidance provided in CySEC’s Policy Statement, particularly the sections that outline the requirements for risk assessments and the criteria for selecting appropriate RCOS. Institutions shall then assess their current onboarding processes and determine how they can be enhanced through the integration of digital solutions.

Moreover, ongoing monitoring and evaluation will be essential to ensure that the adopted solutions continue to meet regulatory requirements and effectively manage risks. Institutions shall be prepared to make adjustments as needed, based on feedback from both internal assessments and supervisory reviews.

5. Final thoughts

CySEC’s Policy Statement on the enhancement of non-face-to-face customer onboarding processes represents a significant advancement in the regulatory landscape of Cyprus’s financial sector. By embracing technological neutrality and encouraging the adoption of innovative digital solutions, CySEC is positioning Cyprus as a forward-thinking jurisdiction that is well-equipped to meet the demands of a digital-first world.

For financial institutions, this is not just a compliance requirement but an opportunity to modernize their operations, improve customer experiences, and enhance their competitiveness in a global market. As the financial sector continues to evolve, those who are proactive in adopting these changes will be best positioned for success.

6. How can SALVUS assist you? 

At SALVUS, we understand the complexities and challenges that come with implementing new regulatory policies. The SALVUS Regulatory Compliance team is well-versed in the requirements set forth by CySEC and can support financial institutions looking to enhance their non-face-to-face customer onboarding processes. From conducting thorough risk assessments to guiding through the selection of the most suitable remote customer onboarding solutions, we offer end-to-end services that ensure compliance and operational efficiency.

We work closely with our clients to develop tailored solutions that align with their specific needs and objectives. Our deep understanding of the financial regulatory landscape in Cyprus, makes us the ideal partner for institutions looking to navigate this new regulatory environment successfully.

Please contact us at info@salvusfunds.com if you are interested in learning more about the enhancement of non-face-to-face customer onboarding processes with electronic methods.

#StayAhead

Should you be interested in reading previously authored articles regarding Remote Customer Onboarding Solutions, AML Regulatory Updates, and the areas of EU Regulatory Compliance, please visit the selected articles below:

• The EBA Guidelines on Remote Customer Onboarding Solutions
• Key AML Regulatory Updates in 2024
• The 6 Areas of EU Regulatory Compliance

The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.