Dubai: The recently formed KYC [know your customer] consortium is a positive development for the UAE banks, according to Moody’s, the credit rating agency.
“The [new] platform will facilitate faster and more secure exchange of authenticated and validated digital customer data and documents through distributed technologies powered by blockchain,” said Mik Kabeya, an analyst at Moody’s. “This will ensure improved compliance with local and international KYC regulations while reducing the risk of data theft.”
The KYC platform will launch this quarter, at which point it will open for additional qualified financial institutions and licensing authorities to join.
The consortium involves Dubai Department of Economic Development’s Competitiveness Office, six banks and various licensing authorities.
Dubai Economy [formerly DED], along with Emirates NBD, Emirates Islamic, HSBC, RAKBank, Abu Dhabi Commercial Bank (ADCB) and Commercial Bank of Dubai (CBD), had on February 19 announced the formation of the consortium for sharing of verified KYC data between banks and licensing authorities in the UAE.
The “KYC Blockchain Consortium” will facilitate faster, more secure on-boarding and exchange of digital customer data through advanced blockchain-powered distributed technologies - it’s a first-of-its-kind in the region.
“The creation is credit positive for UAE banks... [and] support asset quality and profitability,” said Kabeya.
ENBD is an early adopter of advanced digital technology, and in 2017 launched Liv., a lifestyle digital bank targeting millennials, which had 350,000 customers as of December 2019.
Moody’s noted that non-compliance with KYC regulations, particularly for anti-money laundering and terrorist financing, can have material legal implications and result in sizeable penalties for banks. Theft of client data can cause reputational damage.
‘Mutualisation’ of data
In addition, the platform will support regulatory oversight of banks’ collection and management of KYC data. The consortium will drive the mutualisation of KYC efforts among existing and future participants on a common platform.
The future vision is for the consortium-run ecosystem is to serve the greater good by improving ease of doing business as well as overall regulatory compliance in UAE. Smart Dubai in collaboration with the UAE Central Bank will play a pivotal role in overseeing and regulating the consortium’s operations.
“We also expect it to help credit risk management with better data for client underwriting and debt collection,” said Kabeya. “The consortium will support the franchises and profitability of UAE banks by improving customer service through shorter turnaround times for customer onboarding, including opening a bank account.
“The platform will also reduce the financial cost for banks of managing the paper-based KYC data of already registered companies.”
Dubai Pulse, a joint initiative between Smart Dubai and telecom provider du, is the platform enabler. The Smart Dubai Department, in collaboration with the UAE’s central bank, will oversee and regulate the consortium’s operations.