New MLR guidance recognises trusted digital identities in financial services

By Sarah Croft | September 24, 2025 | Compliance, Digital identity, KYC/AML, Right to Work

Over the past few years, the benefits of digital identity have become increasingly clear for our customers, whether they’re managing employment, background screening, or tenant checks. Whilst digital identity is also positioned as a solution to some of the financial sector’s biggest challenges – keeping pace with fraud, reducing inefficiency, and removing friction from customer onboarding – until now, the lack of regulatory clarity around how digital identities fit into Money Laundering Regulations (MLRs) has held back wider adoption.

That’s why we welcomed the announcement from the Office for Digital Identities & Attributes (OfDIA) and HM Treasury to produce new guidance that recognises the role of reliable digital identities in MLRs. This feels like the government aligning with what the industry has been asking for: clear, authoritative recognition of certified Digital Verification Services (DVS) as valid tools for compliance.

The fact that this guidance is being shaped by OfDIA, the team behind the UK Digital Identity and Attributes Trust Framework, adds real weight. Their role in setting standards, certifying providers, and ensuring regular audits through UKAS gives businesses the confidence they need to move forward.

This isn’t just about ticking compliance boxes. It’s about unlocking real value. The government’s own analysis suggests digital identity could deliver £4.3 billion in economic efficiencies by 2034. That’s not surprising when you consider how much time and cost is tied up in manual checks, document handling, and fraud remediation.

At TrustID, we’ve seen first-hand how digital identity can transform onboarding and compliance. But we’ve also seen how uncertainty can stall progress. This guidance update, backed by clear standards and certification, will hopefully give the clarity the industry has been waiting for. And that’s good news for DVS like TrustID and our customers alike.

The new guidance, shaped by feedback from over 200 organisations, will confirm that digital identity checks, when carried out by certified providers, can be used to meet MLR requirements. That’s great news for firms looking to streamline onboarding, reduce fraud, and improve the customer experience.

We’re especially encouraged by the government’s support for a risk-based approach. It gives firms the flexibility to adopt digital identity in a way that fits their business model, without compromising on security or compliance. And with 75% of users reporting faster onboarding through digital checks, the benefits are clear and tangible.

The updated guidance will:

• Set out what qualifies as a trusted digital identity under AML rules, including how they’re verified, who can verify them, and what standards must be met.
• Confirm how digital identity providers, certified under the UK Digital Identity and Attributes Trust Framework (DIATF), satisfy MLR requirements, thanks to statutory recognition via the Data Act and UKAS accreditation.
• Issue practical guidance to support companies integrating digital identity verification into their risk-based CDD processes, whether onboarding high-risk clients or conducting ongoing monitoring.

We’re optimistic about what comes next and we’re excited to help more financial services organisations take advantage of what digital identity has to offer.

If you’re exploring how to bring digital identity into your compliance process, we’d love to chat.