Remote Customer Onboarding begins as of March 8!

The possibility of establishing a contractual relationship with remote customer identification, which has been applied in the banking sector for a while, and therefore has been expected by the capital markets, is now possible for portfolio management companies and intermediary institutions. Pursuant to the "Communiqué on Remote Identification Methods Used by Intermediary Institutions and Portfolio Management Companies and Establishment of Contractual Relations in an Electronic Environment (III-42.1)”  published by the Capital Markets Board, the employees and customers of portfolio management companies and intermediary institutions, such as Banks, Factoring and Financing Companies, will be able to establish remote contractual relationships through an online video call, without the need to be physically in the same environment.
The prominent issues associated with this development are, training the employees who will carry out the identification, the general principles that are to be followed during and after the video call process, the methods of remote identification, recording personal information and legal responsibility.  

Training the Employees

The employee who will carry out the remote identification procedure must receive training in this regard. This training must be conducted at least once a year and after each legislative change, and must introduce the framework of legislation on the protection of personal data. The appointed employee will need to work in separate and appropriate areas with restricted access, so that all necessary measures are taken in order to prevent any security breaches. 

Risk Assessment

Pursuant to the regulations, the application of a person will be received through a form which will be filled out electronically, through the application of an intermediary institution or portfolio management company which operates the remote identification process, before beginning with the video call.  This form will include all necessary information within the framework of measures which have been determined by the Financial Crimes Investigation Board and that are deemed necessary in terms of a remote identification. An intermediary institution or portfolio management company will then carry out a risk assessment based on the information provided in the aforementioned form. Depending on this risk assessment, the remote identification process may be cancelled before starting the video call. 

Protection of Personal Data and Storage of Datas

For purposes of this remote identification procedure, the only sensitive personal information which may be used is the persons biometric data, and even then, the explicit consent of the person must be recorded in an electronic environment. The protection of personal information is a matter that must be taken with the utmost sensitivity. Accordingly, video calls shall be made through an end-to-end encryption. The remote identification process should be recorded, and the documentation tied with the persons application must be kept for 10 years.  

Methods of Remote Identification

Important mechanisms have been put forward in an attempt to prevent any risk and possible abuse. These mechanisms also include authentication procedures and technical methods that ought to be used. The new regulation also mandates the necessity of intermediary institutions or portfolio management companies to take additional measures so as to prevent the risks associated with forged face technology. In terms of measures to be taken with a risk-based approach, tightened measures to be taken in remote identification regulated in the Financial Crimes Investigation Board General Communiqué (Sequence No: 19) shall be taken into account.

Legal Responsibility

In the event of a dispute on a transaction that will create an obligation on the individual or a third party, the burden of proof will be on the intermediary institution or portfolio management company. Therefore, it is important to monitor persons identified through a remote identification in a different risk profile. The Capital Markets Board will thus have the authority to stop or restrict the remote application of an individual if the intermediary institution or portfolio management company do not comply with the provisions of the remote identification process. 

Contractual Relations in an Electronic Environment 

Pursuant to the measures that are to be taken, and the methods that are to be applied pursuant to the new regulation, electronic agreements signed between portfolio management companies and its customers and electronic agreements signed between intermediary institutions and its customers regarding the investment services and activities that will be offered by the institution such as guarantees, sureties, assignment etc., shall be deemed to be established in writing.  

Accordingly, in order for the contract to be concluded (i) all provisions of the electronic contract must be communicated to the customer through an information or communication device, (ii) the parties’ declaration of intent must be signed through a customer-specific encryption secret key and be passed on to the intermediary institution or portfolio management company and (iii) the information shown to the customer will need to be signed by the customer.