Asean banks complete trial of KYC using blockchain – first in the region

OCBC Bank, HSBC and Mitsubishi UFJ Financial Group (MUFG), together with the Infocomm Media Development Authority (IMDA), has become the first consortium in South East Asia to successfully complete a proof-of-concept for a Know Your Customer (KYC) blockchain. This development raises the possibility of using blockchain technology to make one of the most complex and highly-regulated of financial processes more efficient and secured, thereby 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. It is a manual and paper-based process that can take weeks, as resources are spent validating multiple physical documents to ascertain the identity of the customer. This is laborious and inefficient for both the bank and the customer. The manual process also gives rise to inconsistent information being collected by banks, and customer information not being promptly updated.

The KYC blockchain – running on a Distributed Ledger Technology (DLT) platform which enables structured information to be recorded, accessed and shared across a distributed network using advanced cryptography – allows banks to collect, validate and share customer information – with the customer’s consent – accurately, efficiently and in a secured manner. 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.

Mr Pranav Seth, Head of E-Business, Business Transformation and Fintech and Innovation Group, OCBC Bank “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. Our pioneering efforts have resulted in a KYC process that will not only enhance customer convenience, but will improve the industry’s operating efficiencies while reducing financial fraud and crime.”

OCBC Bank is the longest established Singapore bank, formed in 1932 from the merger of three local banks, the oldest of which was founded in 1912. It is now the second largest financial services group in Southeast Asia by assets and one of the world’s most highly-rated banks, with an Aa1 rating from Moody’s. OCBC Bank has been ranked Asean’s strongest bank and among the world’s five strongest banks by Bloomberg Markets for five consecutive years since the ranking’s inception in 2011.

Source: OCBC Bank