OCBC Bank, HSBC and Mitsubishi UFJ Financial Group (MUFG), together with the Infocomm Media Development Authority (IMDA), have completed a proof-of-concept for a Know Your Customer (KYC) blockchain.
This development is expected to contribute toward blockchain’s use to secure financial processes while combating anti-money laundering (AML) and the financing of terrorism (CFT).
The existing KYC process consists of submitting a set of identification documents each time an individual or corporate customer starts a new relationship with a bank. New relationships include opening an account, applying for a credit facility or buying an insurance policy.
Currently, KYC is conducted individually by banks, requiring customers to provide the same information to different institutions. The manual process can take weeks, with resources spent validating multiple physical documents to ascertain the identity of the customer. The manual process also raises the risk of inconsistent information being collected by banks, and customer information not being promptly updated.
The KYC blockchain, which runs on a Distributed Ledger Technology (DLT) platform, allows structured information to be recorded, accessed and shared across a distributed network using advanced cryptography. Banks can collect, validate and share more accuatecustomer information with the customer’s consent. This vastly reduces the duplication of information and manual checks for both banks and customers, while enhancing the quality of the customer information that is stored.
Customers’ information encrypted on the shared ledger can be easily validated by referring to government registries, tax authorities and credit bureaus. Banks can also store secured digital records of the validation process on the shared KYC platform to streamline auditing and regulatory reporting.
The prototype’s performance was tested between February and May 2017 for its functionality, scalability and security. It remained stable even with a high volume of information flow, was resistant to tampering by third parties and maintained confidentiality by permitting access to the ledger’s information only with legitimate authentication.
“The MAS has spoken about the importance for Singapore to “work smarter” in how it fights financial crime in areas like banks’ approach to their “Know Your Customer” due diligence and through its use of technology,” Beaver Chua, Head of Financial Crime Compliance, HSBC Singapore. “The launch of this KYC platform is an accumulation of all of these aims: collaboration, innovation and crime prevention, and HSBC is delighted to have been able to partner in this initiative.”
“MUFG has a well-established global innovation network focused on harnessing the group’s expertise in innovation to transform the way our clients do business,” said Michael Truter, Deputy General Manager, Asian Systems Office, MUFG’s banking entity, The Bank of Tokyo-Mitsubishi UFJ, Ltd. “In Singapore, we are proud to participate in various Fintech initiatives such as this redesign of existing KYC processes using DLT, and we look forward to successfully developing a platform that enhances transparency, trust and reliability amongst banks and their customers.”
“This partnership fans the spirit of cooperation among competitors as well as regulatory and government bodies, and we hope this will help foster and inspire more of such collaborative innovation initiatives,” said Pranav Seth, Head of E-Business, Business Transformation and Fintech and Innovation Group, OCBC Bank.
By FinTech Innovation editors | 2017-10-04