UK poised to approve digital IDs for AML checks

Published Date : 8/14/2025 

The UK government is set to approve the use of digital identities for Anti-Money Laundering (AML) checks, a move that could significantly enhance the efficiency of fraud and compliance processes in financial institutions. 

Financial institutions in the UK are on the cusp of a significant change that will allow them to use digital identities for Anti-Money Laundering (AML) checks. This development comes after HM Treasury and the Department for Science, Innovation and Technology’s (DSIT’s) Office for Digital Identity & Attributes (OfDIA) announced new Money Laundering Regulations (MLRs). These regulations will implement the updated status of digital identities under the Data (Use and Access) Act.

The new MLRs will define trusted digital identities as those provided by certified providers under the Digital Identity and Attributes Trust Framework (DIATF). The certification process is recognized by the UK Accreditation Service (UKAS), ensuring a high standard of trust and reliability.

The guidance for these regulations follows a public consultation process on how digital identity verification could be integrated into AML procedures. The Treasury received over 200 responses, highlighting the widespread interest and support for this initiative. The consultation emphasized the efficiency gains that digital identities can bring to fraud and compliance checks, as noted in the Financial Services Growth and Competitiveness Strategy. This strategy argues that the financial sector could benefit from a significant portion of the estimated £4.3 billion in economic efficiencies from the Data (Use and Access) Act.

A recent survey conducted by OfDIA as part of their Digital Identity Sectoral Analysis found that 27 percent of respondents had used digital identity to open a bank account. Moreover, 75 percent of those surveyed reported that digital identity verification was faster than the traditional process involving physical documents. This data underscores the potential for digital identities to streamline and enhance the customer onboarding experience.

Yoti, a leading digital identity provider, has also weighed in on the new guidance. The company suggests that the regulations will offer practical advice on integrating digital identity with risk-based customer due diligence (CDD), particularly for high-risk clients. The guidance will address how to handle overlaps between different attributes, such as age verification, and AML requirements.

The benefits of using digital identities for businesses are manifold. Yoti highlights the improved fraud prevention capabilities through biometrics and liveness detection, as well as the facilitation of ongoing risk monitoring. These advantages can significantly enhance the security and efficiency of financial transactions and customer interactions.

Overall, the approval of digital identities for AML checks represents a significant step forward in modernizing the UK’s financial regulatory framework. It promises to enhance the speed, accuracy, and security of compliance processes, ultimately benefiting both financial institutions and consumers. 

Frequently Asked Questions (FAQS): 

Q: What are the new Money Laundering Regulations (MLRs) in the UK?

A: The new MLRs will define trusted digital identities as those provided by certified providers under the Digital Identity and Attributes Trust Framework (DIATF), recognized by the UK Accreditation Service (UKAS).

Q: Why is digital identity important for AML checks?

A: Digital identity can significantly enhance the efficiency of fraud and compliance checks, making the process faster and more secure. It also improves the customer onboarding experience.

Q: What is the Digital Identity and Attributes Trust Framework (DIATF)?

A: The DIATF is a certification framework that ensures digital identity providers meet high standards of trust and reliability. It is recognized by the UK Accreditation Service (UKAS).

Q: How did the public consultation process contribute to the new regulations?

A: The public consultation process, which received over 200 responses, provided valuable insights and support for the integration of digital identity verification into AML procedures.

Q: What benefits do digital identities offer to businesses?

A: Digital identities offer improved fraud prevention through biometrics and liveness detection, and facilitate ongoing risk monitoring, enhancing the security and efficiency of financial transactions. 

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