Digital Services Act: Trust, but verify

Know Your Business Customer (KYBC) provides an opportunity for the EU to protect online consumers that should not be missed in the Digital Services Act, argues Alex Agius Saliba.
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By Alex Agius Saliba

Alex Agius Saliba (MT, S&D) is the European Parliament’s rapporteur for the Digital Services Act Report

02 Aug 2021

The Digital Services Act (DSA) offers a once-in-a-generation opportunity for the EU to update its internet governance rules. With the world watching, and the EU determined to lead the way, we should be ambitious in our goals of creating a digital environment built on trust, choice and a high level of protection for all consumers, citizens and SMEs.

A main focus of our ambition should be protecting and safeguarding EU citizens’ and consumers’ rights from online threats by guaranteeing a better and safer digital environment with real, tangible rules in a virtual world where there are no borders.

“Executed correctly, KYBC will provide an effective tool for fighting the broad range of illegal activities online and protect consumers, citizens and business of fraudulent practices”

What is currently on the table is a good start, but for achieving the European Commission’s own mantra of “what is illegal offline has to be illegal online”, then unfortunately, the proposal remains half-baked.

The COVID-19 pandemic has demonstrated the resilience of our e-commerce sector and its great potential as a driver for relaunching the European economy. At the same time, it has exposed the vulnerability of online consumers.

They are at risk from misleading trading practices and from dishonest and fake businesses selling counterfeit, illegal or – worse still - potentially dangerous products and services that are not compliant with EU safety rules.

This problem is exacerbated by the fact that often the identity of the companies selling such goods cannot be established, as these fraudulent and illegal businesses can freely and easily hide their true identities while ripping off consumers and stifling small business that respect European rules and standards.

This is unacceptable, and this is why the ‘Know Your Business Customer’ (KYBC) principle is becoming increasingly important. 

Fortunately, the Commission has recognised that KYBC is a key driver for a safer and more reliable internet; however, this is where the ‘half-baked’ aspect lies.

We need to be much more far-reaching if we are to make a difference for European consumers and businesses. The current DSA proposal limits its KYBC obligations to large online marketplaces, such as Amazon and eBay.

That tiny fraction of the problem cannot be the whole answer. We will not address the problems at hand if we are willing to settle for such woefully limited KYBC provisions.

There will be substantial loopholes that could be, and I am sure will be, exploited by these nefarious actors, and I strongly believe that we would miss out on the opportunity that the DSA is offering. 

“Fraudulent and illegal businesses can freely and easily hide their true identities while ripping off consumers and stifling small business that respect European rules and standards”

If we want to protect consumers and legitimate businesses from online harm and illegal products and services, we need broader KYBC obligations. We need robust obligations for online service providers selling essential web services such as hosting, domain names, advertising and payment services.

These service providers should prevent fraudulent companies from selling illegal and unsafe products and services to consumers in Europe by verifying the identity of their business customers. KYBC will also help simplify determining the identify the sources of the illegal activity wherever it occurs on the internet.

This includes such pernicious threats as unlicensed online pharmacies, child exploitation as well as illegal streaming, illegal gambling and the sale of fake and substandard goods. 

KYBC obligations will provide an opportunity to close legal loopholes and provide an important part of the solution that is proportionate to these grave online threats.

To this end, KYBC should be limited to commercial relationships - not individual consumers - and will simply require hosting providers to verify the information and identity of their business users with whom they have a direct commercial relationship.

In fact, several free and publicly accessible databases of company registries already exist at EU level, rendering such a verification easy to undertake.

Similar successful practices already exist in the financial world, so I believe it is possible to have tailored solutions specific for the digital platforms and service providers.

If you are a legitimate business, why would you hide or present a fraudulent identity? Surely it is important to know who is paying for your services – and in some case, paying millions of Euros.

Legitimate business customers with VAT registrations and similar face no difficulty supplying such information. How much more harm will we allow EU citizens to be exposed to before implementing, and more importantly enforcing, common sense business practices that we follow every day in the offline world? 

For me, I say “no more”. Let’s be ambitious and let us lead the way to give European consumers and business what they deserve – a safe and secure online environment. Executed correctly, KYBC will provide an effective tool for fighting the broad range of illegal activities online and protect consumers, citizens and business of fraudulent practices. 

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