E-KYC IN BANKING SECTOR
In November 2019, the government issued Decree No. 87/2019/ND-CP dated November 14, 2019 amending a number of articles of Decree No. 116/2013/ND-CP (“Decree 87”), detailing implementation of a number of articles of the Law on Anti money laundering. Decree 87 allows financial institutions to decide whether to meet in person when establishing relationships with new customers. This amendment is crucial to deploy electronic Know Your Client (“e-KYC”), facilitate the application of innovations, and to promote the digitalization in banking operations.
Furthermore, Decree 87 is strengthened by the Prime Minister’s Decision No. 149/QD-TTg dated January 22, 2020 approving the National Comprehensive Financial Strategy until 2025, orientation to 2030 (“Decision 149”). According to the Decision 149, to ensure the people’s synchronization, convenience, and efficiency when using basic financial products and services, allows the deployment of e-KYC to verify and authenticate the bank account holder’s identity.
On December 4, 2020, the State Bank of Vietnam (“SBV”), in order to delineate the Decree 87 as well as bring into practice the Decision 149, issued Circular No. 16/2020/TT-NHNN (“Circular 16”) amended the Circular 23/2014/TT-NHNN (“Circular 23”) guiding on the opening and using of the payment account, which comes into force on March 05, 2021. Circular 16 stipulates some measures that can be taken into account while deploying e-KYC to open and use an individual bank account. The following contents explain the application of e-KYC under these laws and regulations.
II. Deployment of e-KYC
In general, the bank may decide on the measures, forms and technologies to identify and verify its customers but must ensure to comply with some procedures and technology requirements. Besides, the e-KYC solution is not applied to joint bank account holders, foreigners, minors (individuals under the age of 18).
Regarding the mandated procedure, the bank must promulgate and publish its procedures for online opening of checking account in conformity with the Law on Anti-money Laundering, the Law on E-transactions, and relevant regulations on the assurance of safety and confidentiality of clients’ information, and security in operations of the bank. The procedures must at least include the following steps:
- To collect information concerning the application for opening a payment account;
- To inspect, collate, and verify the customer’s identity information;
- To warn clients about prohibited acts while the opening and using of the payment account;
- To provide to the customer and enter into the agreement on opening and using of payment account; and
- To notify the client of the account number, account name, limitation of the transactions, and the effective date of the account.
Regarding the technology requirements, the bank is required to implement the following minimum measures in the e-KYC solution to identify and verify a customer’s identity.
Firstly, the bank must ensure to have technologies for collecting, checking, and verifying to ensure the matching between a client’s identity information including, (i) biometric data (fingerprints, face, iris, voice, and other biometric attributes) and (ii) biometric attributes on the customer’s identity documents (identity card, passport, birth certificate) or personal identity data certified by competent authorities or other credit institutions or electronic certification and identification service providers.
Secondly, the bank must adopt technical methods for certifying the identified client’s consent to the agreement on opening and using the payment account.
Thirdly, the bank must formulate (i) procedures for risk management, control and assessment, that include measures for preventing acts of impersonating, intervening, modifying or falsifying the verification of a client’s identity before, during and after the inspection of the account opening, and (ii) measures for verifying a customer’s identity to make sure that transactions made via payment account verified by e-KYC are made by the holder of such account.
Last but not least, the bank must adequately store and manage the information/data used for identifying and authenticating customer including: client’s identity information; biometric attributes/characteristics; sounds, images, videos and recordings; telephone number used to make a transaction, and transaction history to serve the inspection, examination and trace requests, complaints and disputes, and provide information at the request of competent authorities.
In addition, based on its technological conditions, the bank shall evaluate risks and decide the limit of the transactions, provided that the total value of the transactions (debit) does not exceed VND 100 million/month/customer. Bank may apply a higher threshold for the transaction on the occasion that the bank performs video call to collect, inspect, verify the customer identity, which has the same effectiveness as meeting in person; or adopting technologies for inspecting/collating the customer’s biometric characteristics with such biometric data from the government database.
In conclusion, deployment of e-KYC shall create a huge favorable for cashless transactions, increase utility for customers, help the bank to reduce the paperwork, storage space for such records. Moreover, Circular 16 also actively removes obstacles for traditional banks in the competition with fin tech companies (e.g., Momo, Grab Moca, Zalo Pay).