"In the fight against financial crime, banks play a key role and sharing information is vital.”

“In the fight against financial crime, banks play a key role and sharing information is vital.”

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 complete a proof of concept for a know your customer (KYC) blockchain.

The parties say the development “raises the possibility” of using blockchain to make KYC “more efficient and secured, thereby combating anti-money laundering (AML) and the financing of terrorism (CFT)”.

Beaver Chua, head of financial crime compliance, HSBC Singapore, says: “Financial crime has in the past had connotations of being ‘low impact’ but this belies the devastating effect it has on people and societies: it threatens livelihoods, ruins companies and bankrupts individuals. In the fight against financial crime, banks play a key role and sharing information is vital.”

According to the consortium, 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. This manual process also “gives rise to inconsistent information being collected by banks, and customer information not being promptly updated”.

Their KYC blockchain runs on a distributed ledger technology (DLT) platform which enables structured information to be recorded, accessed and shared across a distributed network using “advanced” cryptography.

Customers’ information encrypted on the shared ledger can be validated by referring to government registries, tax authorities and credit bureaus. Banks can also store secured digital records of the validation process on the platform to “streamline auditing and regulatory reporting”.

The prototype’s performance was tested between February and May 2017 for its functionality, scalability and security. They revealed the results today (3 October).

The consortium says the prototype 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”.

@banking
techno