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BANKING TECHNOLOGY | Staff Reporter, Singapore
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OCBC Bank, HSBC, MUFG complete Southeast Asia's first KYC blockchain proof of concept

The banks worked with Singapore's Infocomm Media Development Authority.

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. 

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