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Digital ID systems have the potential to improve the reliability, security, privacy, and efficiency of the process of identifying individuals in the financial sector, to the benefit of both customers and regulated entities. However, digital systems also present a variety of technical challenges and risks of failure. Well-design policies, and digital ID system design that fosters both inclusion and trust, are fundamental to mitigating such risks and guarding against challenges. Driven by the rapid growth in digital payments, which requires a better understanding of how individuals are being identified and verified in the world of digital financial services, the Financial Action Task Force (FATF) released Digital Identity, its guidance on digital ID, in 2020. This document will focus on the policy considerations of digital ID and financial inclusion, building on the 2013 FATF guidance on financial inclusion, the 2018 G20 Digital Identity Onboarding for the G20 Global Partnership on Financial Inclusion, the 2020 digital ID guidance from the FATF, Principles on Identification for Sustainable Development, Enhancing Cross-Border Payments: Building Blocks of a Global Roadmap, and, finally, practical country experience with ID needs and digital ID implementation, where available. This toolkit aims to provide direction for financial-sector regulators on how to leverage digital ID systems and digital ID solutions to enhance Customer Due Diligence practices.