Bank Negara issues policy document on E-KYC

Central bank to ensure secure application of technology

PETALING JAYA: Bank Negara has issued a policy document on electronic Know-your-Customer (E-KYC), which is an online process of identifying and verifying individual customers.

In a statement, Bank Negara said the policy document aims to accelerate and streamline practices of industry players in their adoption of E-KYC technology.

The policy document seeks to promote safe and secure application of E-KYC technology in the financial sector by clarifying desirable outcomes in the use of E-KYC and sets out best practices, as well as parameters to ensure security and integrity of the on-boarding process for customers.

Bank Negara said financial institutions may decide on any combination of methods to conduct identification or verification through E-KYC such as connecting to a public or private database, facial recognition or video call.

“This is with due regard to the assessment of risk and level of assurance needed for a particular product, provided the requirements in the E-KYC policy document are met.

“For products listed in appendix two of the E-KYC policy document, the E-KYC steps listed must be observed and complied with,” it said.

Given limited performance data on E-KYC solutions in the Malaysian market, the credit transfer step is required as a safeguard in the initial implementation phase.

However, Bank Negara said it would consider reviewing the credit transfer requirement in the future, once sufficient performance data becomes available and the E-KYC solution achieves a reasonable level of assurance.

The central bank welcomes financial institutions to explore alternative steps that may provide the same or higher level of identity assurance as the credit transfer check, with suggestions directed to Bank Negara accordingly.

On the minimal customer details required to be obtained from the credit transfer, the minimal details should provide reasonable assurance for a financial institution to attest the identity of the customer.

“This includes matching the name or identity document number obtained with the same details provided by the customer.

“In the case where names returned are shortened, for example, financial institutions may also choose to utilise other methods to cross-check for identity or passport numbers for added assurance,” said Bank Negara.

The adoption of E-KYC technology by the banking industry is in line with the central bank’s efforts to facilitate greater digital offerings of financial services.

E-KYC, which enables the digital on-boarding of customers to occur anytime and anywhere, is expected to pave the way for greater innovation in the financial sector, including end-to-end offering of digital financial services for customers.

With implementation of E-KYC, a majority of customers will no longer need to visit the physical premises of a financial service provider to open an account.

In addition to increased customer convenience, the digital on-boarding of customers enabled by E-KYC also lowers cost for both users and providers.

This can also help increase competition in the financial sector over the long term.

The policy document forms part of a series of measures adopted by the Bank in ensuring that regulatory requirements support the country’s agenda on digital economy.

“This is with due regard to the assessment of risk and level of assurance needed for a particular product, provided the requirements in the E-KYC policy document are met.” Bank Negara