Traditionally, account opening processes in a financial institution required face-to-face contact between the financial institution’s onboarding team and the prospective client. However, as demand from investors for non-face-to-face (NFTF) onboarding is rising, a prominent international standard setting body, the Financial Action Task Force (FATF), has laid out a series of recommendations for financial institutions to consider when onboarding clients without interpersonal contact. Hong Kong’s financial services regulator, the Securities and Futures Commission (SFC) and Singapore’s Monetary Authority of Singapore (MAS) responded to the FATF recommendations by setting out requirements that financial institutions should follow to onboard clients using a NFTF approach. Many financial institutions operating in Hong Kong or Singapore must provide to the regulator at least one assessment – produced by an appropriate independent third-party – of any new technology implemented to facilitate NFTF. In this article, GreySpark Partners and Holland & Marie (i) explore the implications for financial institutions of the permissibility of NFTF client onboarding in Hong Kong and Singapore, (ii) outline the regulators’ expectations for financial institutions to provide a third-party evaluation of NFTF technology and (iii) propose a multi-jurisdictional approach to this third-party evaluation to make the exercise more efficient for both financial institutions and vendors.
Historically, face-to-face meetings between prospective clients and financial institutions have been necessary during client onboarding to authenticate documentation and verify identities. However, there are many advantages to these in-person meetings no longer being necessary, where suitable processes and technology are in place to replace them. Not only will the end-to-end process for account opening be completed more quickly, but it will facilitate additional cross-border business for firms in those regions that permit it. Until recently, in-person verification of client identities was thought to pose the least risk of impersonation. However, technology utilised within the confines of a well-defined process can now facilitate reliable identification of a person and authentication of the required documentation without the need to meet in person.