The draft circular suggests obligatory e-KYC processes, including identity verification and customer due diligence.
The central bank of the Philippines, BANGKO SENTRAL ng Pilipinas (BSP), is considering the imposition of mandatory electronic Know Your Customer (KYC) requirements on financial institutions to improve customer identification and verification.
In a circular released on Tuesday (28 September), the bank stated “BSP-supervised financial institutions may use different methods to conduct customer identification and verification including e-KYC through digital ID system”.
Concerned parties are given a deadline of October 12 for submitting their feedback on the draft circular, the BSP said.
According to the proposed requirements, all financial institutions will be obligated to digitize customer records in accordance with existing BSP and AML council regulations. The obligation will be added on top of the current processes, which include acquiring a photocopy or scan of identification documents, manual recording of information, and biometrics gathering.
Based on the draft circular, e-KYC processes include robust identity checks, which involve the collection, verification, and authentication of identity evidence and information provided by each customer.
The e-KYC process is also expected to have authentication and identity lifecycle management. This means banks will have to verify that the person who asserted his or her identity is the same person that initially enrolled for the service. This authentication should be done using multiple authentication factors.
Financial institutions should also perform Customer Due Diligence to prevent the risks of money laundering and financing of terrorist activities. Through CDD implementation, factors such as the client, product, delivery channel, and geographical location, among others, are kept under close monitoring for the timely detection of suspicious activities.
“BSP-supervised financial institutions implementing e-KYC must perform customer identification and verification under the same standards equivalent to those for face-to-face basis, and shall establish appropriate risk management processes,” the draft circular said.
The proposed requirements also direct banks to allow clients to use their national ID as their sole proof of identity. This is consistent with the Republic Act 11055 or the Philippine Identification System Act.
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