The Central Bank of Malaysia, Bank Negara Malaysia (BNM), has issued a policy document Electronic Know-Your-Customer (e-KYC). The policy document aims to accelerate and streamline practices of industry players in their adoption of e-KYC technology, the online process of identifying and verifying individual customers.
The policy document seeks to promote the 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. The policy document is applicable to licensed banks, investment banks, life insurers, licensed Islamic banks, approved non-bank issuers of designated payment instruments, and licensed money-changing operators and remittance service providers.
According to the document, a financial institution should have consider three basic authentication factors, namely, something the customer possesses (such as identity card, registered mobile number), something the customer knows (such as PIN, personal information) and something the customer is (such as biometric characteristics). In identifying and verifying a customer’s identity through e-KYC as required by the policy document on AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) and TFS for FIs (Targeted Financial Sanctions for Financial Institutions), a financial institution may undertake measures including but not limited to the following:
- Verifying the customer against a government issued ID by utilizing biometric technology
- Ensuring that the government issued ID used to support e-KYC customer verification is authentic by utilizing appropriate fraud detection mechanisms; and/or
- Ensuring the customer is a live subject and not an impersonator (e.g. through use of photos, videos, facial masks) by utilizing liveness detection.
e-KYC solutions may utilize artificial intelligence, machine learning or other forms of predictive algorithms to ensure accurate identification and verification, resulting in automation of the decision-making process for customer identification and verification, thus reducing the need for human intervention.
BNM has been seeking to facilitate greater digital offerings of financial services. e-KYC enables the digital on-boarding of customers to occur anytime and anywhere and can eliminate the need for a majority of customers to visit the physical premises of a financial service provider to open an account and lower costs for banks as well as bank customers. With implementation of e-KYC, a majority of customers 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.
(Sources: Bank Negara Malaysia; The Edge Markets)
