Identity Verification, KYC, and AML Compliance in Russia

Key takeaways
 

Didit provides the first free and unlimited identity verification solution tailored to Russia's KYC and AML regulatory requirements, allowing businesses to save up to 90% on operational costs.

The complexity of Russia's legal framework for compliance demands advanced technological solutions that integrate document verification, facial recognition, and screening against international databases.

Federal laws 115-FZ, 134-FZ, and 230-FZ set strict requirements for client identification and transaction monitoring, with significant penalties for non-compliance.

Identity verification in Russia faces unique challenges like document diversity, the Cyrillic alphabet, and high fraud rates, which can only be overcome with specialized AI algorithms adapted to the local context.

In recent years, concerns about KYC and AML compliance in Russia, along with document verification in the country, have escalated rapidly. Monitoring financial flows and stricter identity control have become priorities for both regulatory bodies and businesses. In this context, Russia stands out due to the complexity of its legal framework and the international attention its financial system receives.

According to the Financial Action Task Force (FATF), the Russian Federation has implemented various measures to combat money laundering and terrorist financing, although recommendations for strengthening certain controls and procedures persist. For companies operating in the country, meeting these requirements presents a challenge: legislation changes relatively frequently, and penalties for non-compliance can be significant.

Against this backdrop, Didit emerges as the first and only market solution capable of offering a free and unlimited Know Your Customer (KYC) service, tailored to Russian regulatory demands. With a combination of document verification, facial recognition, and the option to add AML Screening, Didit greatly simplifies the task of complying with Russia's regulatory requirements and the most advanced international standards.

The Legal Framework for KYC and AML in Russia: Regulatory Requirements

The legal structure regarding KYC and AML in Russia has evolved to safeguard the stability of the financial system and mitigate the risk of terrorist financing. These requirements not only affect banks but also financial service companies, cryptocurrency firms, insurance companies, and other sectors handling monetary flows.

The Russian Federation does not limit itself to its internal laws; it also aligns its regulations with FATF recommendations, participating in periodic reviews. The main domestic supervisory body is the Central Bank of Russia, which coordinates with Rosfinmonitoring to detect and pursue suspicious transactions.

Moreover, companies failing to meet minimum identity verification and fund control requirements may face economic sanctions, license restrictions, or even business closure.

Federal Law No. 115-FZ

Also known as the "Law on Prevention of Money Laundering and Terrorist Financing," Federal Law No. 115-FZ was enacted on August 7, 2001, and establishes the obligation for due diligence during client onboarding. This law requires minimum identity verification and monitoring of unusual transactions. It has undergone several subsequent reforms to reflect FATF guidelines and strengthen the identification of suspicious activities.

Federal Law No. 134-FZ

Law 134-FZ introduces relevant amendments to Law 115-FZ, focusing on identifying ultimate beneficial owners and collaborating with international bodies. It reinforces transaction transparency and requires financial institutions to examine their clients' operations in greater detail. Additionally, it defines a system of fines and economic sanctions that have become stricter over time.

Federal Law No. 230-FZ

This legislation complements 115-FZ and 134-FZ, expanding Rosfinmonitoring's supervisory capacity and detailing mandatory reporting requirements for high-value or potentially fraudulent transactions. It is particularly relevant for tech companies, fintech, and payment platforms, which often handle large daily transaction volumes.

Identity Verification in Russia: A Challenge for Businesses

Identity verification in Russia is complicated by several factors. Firstly, different official documents are used for various purposes (internal passport, international passport, driver's license, etc.), and the country uses a Cyrillic alphabet that introduces variations and potential transcription errors. Additionally, the notable incidence of document fraud and recent identity theft methods, like deepfakes, demand more advanced verification technologies.

For companies, especially those providing financial or payment services, the inability to quickly verify the authenticity of a document or a client's face results in a double cost:

• Operational cost: Staff dedicated to manually reviewing documentation increases their workload, slowing down the onboarding of new clients.
• Fraud cost: Inadequate control can lead to the admission of malicious users who exploit system vulnerabilities for money laundering or financial crimes.

In response, it is essential to have technological solutions that automate and expedite identity verification. This is where Didit provides a radical advancement: its system integrates facial recognition and document verification for free KYC, significantly reducing friction in the digital onboarding process.

Challenges in Document Verification in Russia

Verifying the authenticity of each document requires detailed knowledge of their physical and electronic characteristics. Certain Russian passports have integrated RFID chips with biometric information, while other documents may lack standardized security parameters. Additionally, the adoption of the International Civil Aviation Organization (ICAO) standards for passport design has been progressing, but not always uniformly.

This variety forces companies to have systems that recognize multiple formats and validate digital signatures, holograms, or official seals.

Key Documents: Internal Passport, International Passport, Driver's License, and Residence Permit

• International Passport: Used for international travel, often with NFC chips and various security elements like laminated pages and holographic bands. Verification requires compatible readers. There are three different types of international passports: ordinary, service, and diplomatic, each aimed at a different audience.

• Driver's License: Although Russia has introduced authenticity measures like holographic stamps, the format has varied in recent years, complicating the development of automated solutions.

• Residence Permit: Used by foreign residents in Russia, it may include biometric data and, in some cases, NFC chips. Its control requires specific algorithms to recognize Cyrillic fields and potential translated stamps.

All these particularities make technological adaptation indispensable. A system capable of reading and analyzing multiple linguistic variants, verifying chips, and detecting digital alterations (retouched photos, text manipulation, etc.) is crucial for successful KYC verification in Russia.

Didit: Transforming Identity Verification and KYC and AML Compliance in Russia

In a country where implementation and compliance costs can skyrocket and regulatory pressure is increasing, Didit holds a unique position. It is the first and only solution capable of offering a free and unlimited KYC service in the market, tailored to the peculiarities of Russian documentation and its legal framework.

With Didit, institutions can save up to 90% on verification and compliance costs, maintaining response times of around 30 seconds per validation.

How Does Didit's Technology Work?

• Document Verification: The system relies on highly trained Artificial Intelligence algorithms that check over 3,000 document types from 220 countries and territories. For Russia, this means recognizing internal passports, international passports, driver's licenses, and residence permits with their multiple variations.
• Facial Recognition with Liveness Test: It integrates AI models capable of detecting if the person undergoing verification is real, preventing attacks with printed photos, manipulated videos, or deepfakes. It adapts to Russian faces and handles typical fraud alterations with notable precision.
• AML Screening (optional): For $0.30 per check, companies can access real-time verification against over 250 international databases. This way, they track Politically Exposed Persons (PEPs), sanctions, blacklists, and potential connections to financial crimes. Thus, they comply with laws like Federal Law 115-FZ and its amendments, avoiding the risk of costly sanctions.

Didit allows for the customization of validation parameters to suit each institution, resulting in compliance to the millimeter. This flexibility is essential given the variety of verification scenarios in Russia: from traditional banks to online lending platforms, each with specific internal processes and client segmentation.

Regarding security, Didit boasts certifications like ISO 27001 and complies with international data protection regulations (GDPR), as well as electronic signature and digital transaction standards (eIDAS 2). Additionally, information is encrypted to prevent leaks, offering integrity standards that meet the most stringent global demands.

Benefits of Didit for Businesses

With Didit, companies experience three main improvements:

• Cost Reduction: Manual verification processes are automated, and Didit charges nothing for its KYC service (documents and biometrics), potentially producing a 90% cost saving in compliance.
• Response Speed: Each verification takes an average of 30 seconds, speeding up the onboarding of new clients and positively impacting satisfaction and retention.
• Greater Regulatory Confidence: By aligning with local demands (Bank of Russia, Rosfinmonitoring) and international standards (FATF), companies reduce their risk of sanctions and instill confidence in their own clients.

What Official Documentation Does Didit Verify in Russia?

• Internal Passport
• International Passport
• Driver's License
• Residence Permit

Thanks to AI algorithms and advanced biometric recognition, Didit extracts relevant information from each document, checks its consistency, and ensures that the individual presenting it is indeed who they claim to be. With this coverage, Russian companies can elevate their compliance standards while simultaneously reducing processing costs and times.

In conclusion, the Russian market presents unique challenges in KYC, AML, Compliance, and Document Verification. Current regulations, primarily based on Law 115-FZ and its amendments, demand rigorous supervision and an efficient identity validation system.

However, Didit changes the game by offering free and unlimited KYC, complemented by facial recognition services and the option for AML Screening. This way, any institution operating in Russia can confidently address regulatory obstacles, maintain competitiveness, and ensure a frictionless onboarding process that directly impacts customer satisfaction.

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