Identity Verification, KYC and AML Compliance in Venezuela

Key takeaways
 

Venezuela faces a critical moment in KYC and AML compliance following its inclusion in the FATF's list of jurisdictions under increased monitoring in June 2024, affecting over 4,000 financial institutions and companies that must adapt their verification processes.

The country has established a seven-point action plan that includes strengthening the understanding of ML/TF risks, implementing AML/CFT measures for financial institutions, and improving access to beneficial ownership information.

Venezuelan identity documents are undergoing significant modernization, with the implementation of new security features such as integrated chips, QR codes, and biometric elements in the national ID card, passport, and driver's license.

Identity verification in Venezuela requires robust systems that can process both old and new formats while maintaining compliance with local regulations and FATF requirements, allowing KYC processes to be completed in less than 30 seconds.

KYC (Know Your Customer) and AML (Anti-Money Laundering) compliance in Venezuela presents unique challenges today. The country is under special observation after being included in the Financial Action Task Force (FATF) list of jurisdictions under increased monitoring in June 2024. In response, Venezuela has established a high-level political commitment to strengthen its AML/CFT regime, directly affecting more than 4,000 local financial institutions and companies obliged to comply with these regulations.

Since the adoption of its Mutual Evaluation Report (MER) in November 2022, the country has implemented significant changes that directly impact how companies must conduct their identity verification and anti-money laundering prevention processes. These changes include a comprehensive update of the national risk assessment and the implementation of a seven-point action plan ranging from strengthening financial supervision to improving beneficial ownership information systems.

For companies operating in the country, these regulatory changes imply an urgent need to update their document verification processes and compliance systems for Venezuela. In this article, we will analyze the current legal framework, the main challenges in identity verification, and the technological solutions available to ensure effective compliance.

The Legal Framework of KYC and AML in Venezuela: Regulatory Requirements

The KYC and AML legal framework in Venezuela is strongly influenced by its recent inclusion in the FATF's list of jurisdictions under increased monitoring on June 28, 2024. In response, the country has established a high-level political commitment to work with FATF and CFATF in strengthening its AML/CFT regime, resulting in a significant update of its regulatory structure.

In this regard, Venezuela has established a new financial sanctions regime that strengthens the authorities' ability to act against violations of AML/CFT regulations. This framework includes specific procedures for implementing international sanctions and establishes cooperation mechanisms with foreign authorities.

Organic Law Against Organized Crime and Financing of Terrorism (LOCDOFT)

The Organic Law Against Organized Crime and Financing of Terrorism (LOCDOFT) constitutes the fundamental pillar of the Venezuelan regulatory framework in terms of money laundering prevention. This law establishes fundamental obligations for financial and non-financial entities, including the implementation of robust due diligence systems and the appointment of compliance officers.

SUDEBAN Resolutions for the Banking Sector

The Superintendency of Banks (SUDEBAN) has updated its regulations to respond to the challenges identified in the FATF evaluation. The new provisions emphasize the need for more rigorous supervision of the banking sector, especially regarding the identification of beneficial owners and monitoring of high-risk transactions.

2022 National Risk Assessment Regulations

Following the Mutual Evaluation Report of November 2022, Venezuela has developed a new risk assessment framework that requires all obligated entities to conduct periodic assessments of their vulnerabilities. This regulation establishes specific methodologies for risk identification and mitigation, with special emphasis on inter-institutional cooperation and information exchange.

Regulations for Virtual Asset Service Providers

While Venezuela was one of the pioneers in regulating crypto assets with SUNACRIP's Provision No. 044-2021, which established specific rules to prevent money laundering in the sector, the current situation is one of regulatory uncertainty. Since March 2023, SUNACRIP, the main regulatory body, has been intervened and paralyzed due to a corruption scandal. This intervention has been extended until March 2024, which has created a regulatory vacuum and has led to the closure of mining facilities and the suspension of operations of some cryptocurrency exchanges.

Although the legal framework remains technically in force, in practice "regulatory activity by the government does not exist", which has led to inconsistent application and lack of coherence in the regulatory approach. This situation has significantly affected the crypto asset ecosystem in Venezuela, which previously positioned itself as a leader in the adoption of these technologies in the region.

Identity Verification in Venezuela: A Challenge for Companies

Identity verification in Venezuela presents significant challenges for companies, especially in a context of digital transformation and regulatory changes. The country is at a moment of important transition in its identification systems, which adds complexity to verification processes.

Regarding document complexity, Venezuela is implementing a new national ID card that will incorporate advanced features such as chips, QR codes, and biometric data. This change, although positive in the long term, represents an immediate challenge for companies that must adapt their systems to verify both old documents and new formats.

Frequent changes in identification formats pose an additional challenge. The new Venezuelan ID will include more robust security elements, such as polycarbonate sheets and additional holder data, including biometric and address information. Companies will need to constantly update their verification systems to keep up with these changes.

The need for robust identity verification processes has become critical, especially considering that problems such as homonymy have generated unfair blocks in financial services. Institutions need to implement more sophisticated systems that include document verification and biometric verification to ensure accuracy in identification.

Challenges in Verifying Venezuelan Documents: Key Venezuelan Documents

Document verification in Venezuela is going through a moment of significant transformation, with important updates to its national identification systems that pose new challenges for document verification processes. The country is modernizing its official documents, incorporating advanced technologies and more robust security elements.

Venezuelan National ID Card

The Venezuelan national ID card is undergoing substantial renovation. The Administrative Service of Identification, Migration, and Foreign Affairs (SAIME) has announced the implementation of a new format that will include an integrated chip, QR code, and advanced biometric elements. This new document will be manufactured with polycarbonate sheets, following international standards for document security.

The new format will include more detailed information about the holder, such as full name, date of birth, photograph, unique serial number, fingerprints, address, and blood type. A notable aspect is that its validity will be extended to 20 years for adults, doubling the current validity period.

Venezuelan Passport

The Venezuelan passport, for its part, has evolved towards a biometric format since 2015, presented in 32 or 48-page booklets with a plastic card containing the holder's information in digital format. This document includes a machine-readable zone and advanced security features that comply with international standards.

The Venezuelan passport requires a specific application process through the SAIME portal, where citizens must register and complete a series of precise steps. The current system even allows processing from abroad, facilitating access for Venezuelans residing in other countries.

Driver's License in Venezuela

The new Venezuelan driver's license represents a significant advance in terms of document security. Manufactured with seven-layer polycarbonate, it incorporates holograms reactive to ultraviolet light and an activation chip. This document complies with the regulations of the International Civil Aviation Organization (ICAO), including features that make photographs unforgeable.

A notable innovation is the implementation of a QR code that links the driver to a unique profile in the database of the National Institute of Land Transportation (INTT), allowing immediate access to user and vehicle information. This new format is specifically designed to facilitate the renewal of international exchange agreements, benefiting Venezuelans who need to drive abroad.

Didit: Transforming Identity Verification and KYC/AML Compliance in Venezuela

Identity verification in Venezuela, as well as KYC and AML regulatory compliance, represents a significant challenge at a crucial moment for the country, especially after its inclusion in the FATF's list of jurisdictions under increased monitoring. Didit emerges as the solution that transforms these challenges into digital growth opportunities.

Our proposal transcends conventional KYC service: we are a strategic ally that democratizes access to cutting-edge technologies in identity verification. Through our free, unlimited, and forever identity verification service, Didit is revolutionizing digital identification in Venezuela.

Didit's technology is based on three strategic pillars that directly respond to the specific challenges of the Venezuelan market:

• Document verification: We implement artificial intelligence algorithms capable of validating more than 3,000 types of documents from over 220 countries and territories. Our system is specially adapted to process the new formats of Venezuelan documentation. Curious about how identity documents are verified? We tell you all about it in our blog article.
• Facial recognition: Our customized AI models incorporate passive liveness testing and advanced detection that ensures the authenticity of the user's identity. This technology is crucial in a market where robust verification is a national priority, according to FATF requirements.
• AML Screening (optional): We perform real-time checks against more than 250 global datasets, aligning with the seven points of the action plan established by Venezuela before the FATF in June 2024, especially regarding the identification of beneficial owners and the prevention of money laundering.

What official documentation does Didit verify in Venezuela?

Didit verifies the three main official documents of Venezuela:

• National ID card: We process both current formats and new documents with integrated chips
• Venezuelan passport: We verify all security features of the biometric format
• Driver's license: We validate the new polycarbonate format with its advanced security elements

For the Venezuelan market, this translates into:

• Full compliance with local regulations and FATF requirements
• Reduction of operational costs by up to 90%
• KYC processes completed in less than 30 seconds

Want to transform identity verification challenges in Venezuela into a competitive advantage?