OCBC, MUFG, HSBC, IMDA complete tests of Know Your Customer blockchain
The KYC blockchain is set to reduce the risk of information duplication and the need for manual checks for both banks and customers, while enhancing the quality of the customer information that is stored.
Oversea-Chinese Banking Corp. Limited (SGX:O39), Mitsubishi UFJ Financial Group Inc (TYO:8306) and HSBC, in co-operation with the Infocomm Media Development Authority (IMDA) have completed a proof-of-concept for a Know Your Customer (KYC) blockchain.
The development, according to OCBC, will enable to make one of the most heavily-regulated of financial processes more efficient and secured, thereby combating anti-money laundering (AML) and the financing of terrorism (CFT).
The present KYC procedure is often 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 is set to minimize the risk of the duplication of information and to reduce the need of 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, OCBC said.
OCBC has been embracing novel technology solutions. As reported by FinanceFeeds in July this year, the bank has teamed up with fintech companies BlackSwan Technologies and Silent Eight to implement an AI solution in its compliance operations. The AI solution will be used to detect suspected illegal financing, by searching for information on individual profiles, and mapping suspicious transactions to see how they may be linked.