A Brief Overview of Remote Identification and Critical Amendments on Remote Identification Methods Used by Banks and Establishment of Contractual Relationship in Electronic Environment

The steps taken in digital transformation, specifically in the banking sector, and the requirements of the sector are closely monitored by the authorities. In this context, both sector actors and competent authorities are carrying out many studies to facilitate adaptation to the process and to amend existing regulations to cover these developments.  

The rapid development of technology and the world order are forcing lawmakers to eliminate the necessity for people to physically gather, which is why the importance of remote identification is increasing gradually. It is also critical for the banking industry to determine and verify whether persons are who they declare to be without physically coming together.  

The legal basis of the issue is as follows: within the scope of the "Regulation on Remote Identification Methods to be Used by Banks and Establishment of the Contractual Relationship in Electronic Environment" (Regulation) on the procedures and principles regarding remote identification methods that can be used by banks to acquire new customers and the establishment of the contractual relationship in electronic environment entered into force.

The developments in technology during the enforcement of Regulation had also mobilized the Banking Regulation and Supervision Agency (BDDK). Accordingly, BDDK announced the additional issues it wished to regulate in the Regulation and held discussions with the relevant sector subjects for a long period of time.  

At this stage, the relevant amendments were made and the Regulation Amending the Regulation (Amendment Regulation) was published in the Official Gazette dated 25 May 2023.

The significant changes in Amendment Regulation are as follows:

• Regulation did not include legal entities among the persons to whom banks could "remotely identify and conclude electronic contracts". However, Amending Regulation includes legal entities among these persons. Hence, legal entities could also be customers of the banks through remote identification.
• Accordingly, Amendment Regulation sets out the procedures and methods for verification of the legal entities and the authorized person of legal entities.
• The scope of the risk assessment to be conducted by the bank during the remote identification process has been expanded. Amending Regulation stipulates that a risk assessment may also be conducted for legal entities.
• It is regulated that the verification of the identity document will be completed if the person authorized to represent the legal entity is the same bank customer as the legal entity and his/her identity is determined by logging in to any of the internet banking or mobile banking distribution channels.
• BDDK was authorized to determine the procedures and principles regarding the use of AI-based applications.
• Disabled individuals may be assisted by a third party in case of need during the video call phase of remote identification. Accordingly, it is regulated that the third party, who will be assisted in case of need, could help disabled individuals by presenting the front and back side of his/her identity document. 
• In order to comply with the Financial Crimes Investigation Board (MASAK) legislation, the concept of "real beneficiary" has been added to the definitions article. In this context, "real beneficiary" refers to the ultimate beneficiary of the account or transaction belonging to or under the control of the real person, legal entity or unincorporated entities on behalf of which transactions are made before those who are liable in accordance with MASAK legislation.

• Amending Regulation entered into force on June 1, 2023. Although it is possible for legal entities to become the customers of the banks through remote identification under the Amendment Regulation, this is not yet feasible under MASAK legislation. Since banks are also subject to MASAK legislation, the definition of "customer" in MASAK General Communiqué (Serial No: 19) on remote identification should be amended to include legal entities. With the realization of the necessary regulations, banks will be able to make legal entities their customers through remote identification.

You can reach the full text of Amendment Regulation here (only available in Turkish).

Tagged with: Gökçe, Yağmur Yollu, Elif Aksöz, Fintech, MASAK