UAE positive on KYC utility tests

UAE positive on KYC utility tests

Regulatory authorities and banks in Abu Dhabi have recorded tangible benefits from trials of a shared Know Your Customer utility underpinned by distributed ledger technology.

An industry coalition, comprising Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Al Ansari Exchange, Al Fardan Exchange, First Abu Dhabi Bank, UAE Exchange and ADGM, was formed in February to develop a proof-of-concept to decide the governance framework and the functional requirements of an e-KYC utility.

The app developed for the test phase provides users with a single location where customer identification and verification can be performed once for a customer, with the validated data securely shared by other participants.

Richard Teng, CEO of the regulatory arm of ADGM, says the application represented a radical improvement over the current repetitive and cost-intensive approach to verifying customer bona fides.

“By harnessing the power of technologies such as blockchain, the e-KYC project has demonstrated tangible benefits that may be offered by an e-KYC utility for financial institutions in the UAE," he says. "In addition to enhancing KYC checks across the industry, the utility can achieve significant cost efficiencies and financial inclusion driven by unified KYC standards."

The next step in the project will see if the benefits can be extended to small and medium-sized businesses by easing access to banking services.



bu Dhabi Global Market (ADGM), the award-winning International Financial Centre in the capital of the UAE, is pleased to announce the successful conclusion of the first phase of the industry electronic-Know-Your-Customer (e-KYC) utility project. The Financial Services Regulatory Authority (FSRA) of ADGM, in collaboration with its project advisor, KPMG, have published a high-level summary of the project scope and the key insights for the benefit of the financial industry.
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The e-KYC project, launched in March 2018, was an FSRA-led collaboration with a consortium of the UAE’s major financial institutions including Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Al Ansari Exchange, Al Fardan Exchange, First Abu Dhabi Bank, and UAE Exchange. The objective was to develop a proof-of-concept (PoC) to test operational and technological models of the e-KYC utility. In consultation with consortium members, the FSRA also developed a governance framework and business model on which the e-KYC utility can operate on an inclusive and sustainable basis.
We would like to thank our corporate partners and members of the UAE financial industry for participating in this project and for their commitment to ensuring quality financial services for the country.

The use of digital platforms to share information, transact and test solutions forms a core part of ADGM’s FinTech strategy. We look forward to delivering further meaningful results through the ADGM Digital Sandbox initiative, where we will facilitate FinTech-institutional partnerships and host consortium projects such as the e-KYC project.”

Umair Hameed, Financial Services Advisory Partner, KPMG - “It is very encouraging to see ADGM’s initiative bringing together public- and private-sector entities to collaborate and drive innovation in the UAE. These collaborations are at the heart of the UAE’s FinTech strategy, to drive technological advancements across sectors.”

KEY INSIGHTS AND BENEFITS

While developing and testing the PoC, the FSRA worked with consortium members to build applicable processes and regulations pertaining to KYC individual retail clients into the prototype, with the aim of offering the industry a common set of robust KYC standards.

Notable highlights and potential benefits observed from the project include:

Consortium members can successfully share and validate simulated KYC documentations and data updates about the client on the prototype in a secure environment, supported by blockchain technology. A demo of the prototype can be found HERE.
Data quality and compliance standards can be assured with respect to applicable KYC requirements. Clear guidelines and pre-requisites will have to be identified for any member that qualifies as a contributor of KYC records or information to the utility.
Individual clients can be empowered to decide how their personal data can be shared in the utility, enabling conformance with data protection requirements. In addition, serve as an effective incentive for clients to keep their data accurate and updated.
A commercial model that (i) operates on the basis of incentive fees offered to data contributors, (ii) shares the success fees with the operator of KYC utility, and (iii) charges fees on data consumers, is considered a feasible sustainable model of operation.
An ownership structure of the KYC utility that assures safe custody of customer information and operates on a non-profit mandate will foster trust across stakeholder group.

A summary of the project scope and findings can be found HERE.

PHASE TWO - FACILITATING ACCESS TO BANKING SERVICES FOR THE SME SECTOR

Following the successful first phase of the project, the FSRA is planning to commence on a new phase, to facilitate small and medium enterprises’ access to banking services. The FSRA welcomes feedback and interests from the industry to participate in the project.

E-KYC and robust onboarding practices were a central topic of discussion and interest at the Regional Regulators’ Roundtable held during the FinTech Abu Dhabi Summit on 17 September 2018. The Roundtable saw multiple regulators in attendance from the region including the FSRA, Central Bank of UAE, Securities and Commodities Authority of UAE, Dubai Financial Services Authority, Central Bank of Bahrain, Banking Control Commission of Lebanon, Capital Markets Authority of Kuwait, Capital Markets Authority of Saudi Arabia, and Saudi Arabian Monetary Authority.

About Abu Dhabi Global Market

Abu Dhabi Global Market (ADGM), an award-winning international financial centre (IFC) located in the capital city of the United Arab Emirates, opened for business on 21 October 2015. Established by UAE Federal Decree as a broad-based financial centre, ADGM augments Abu Dhabi’s position as a global hub for business and finance and serves as a strategic link between the growing economies of the Middle East, Africa and South Asia and the rest of the world.

ADGM’s strategy is anchored by Abu Dhabi’s key strengths including private banking, wealth management, asset management and financial innovation. Comprising three independent authorities: ADGM Courts, the Financial Services Regulatory Authority and the Registration Authority, ADGM as IFC governs the Al Maryah Island which is a designated financial free zone. It enables registered financial institutions, companies and entities to operate, innovate and success within an international regulatory framework based on Common Law. Since its inception, ADGM has been awarded the “Financial Centre of the Year (MENA)” for two consecutive years for its initiatives and contributions to the financial and capital markets industry in the region.*

For more details of ADGM, please visit www.adgm.com or follow us on Twitter : @adglobalmarket and Linkedin : ADGM

* Source : The Global Investor Middle East and North Africa (MENA) Awards
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