Financial Crime World

Bangko Sentral ng Pilipinas Issues New Rules on Electronic Know-Your-Customer Processes

The Bangko Sentral ng Pilipinas (BSP) has released new guidelines for financial institutions’ use of electronic “know-your-customer” (e-KYC) processes, outlining minimum requirements for digital identification and verification of clients.

Promoting Efficient Identity Verification

The new rules aim to promote more efficient and seamless identity verification through technology and existing e-KYC systems. According to BSP Governor Felipe M. Medalla, the amendments to the Customer Due Diligence (CDD) guidelines will enable innovation and digital transformation in the financial sector, ultimately advancing the country’s financial inclusion agenda.

Minimum Requirements for Financial Institutions

The new rules require financial institutions supervised by the BSP (BSFIs) to:

  • Use strong information and communication technology architecture
  • Adopt tiered or risk-based e-KYC policies and procedures
  • Use different methods for customer identification and verification, including e-KYC through digital ID systems

Digital Identification and Verification

The central bank emphasized that identity proofing can be documented digitally, physically, or both, but authentication and credentialing must be in digital form. The digital ID system used for CDD purposes must be supported by:

  • Robust technology
  • Adequate governance
  • Processes
  • Procedures to ensure accurate results

Compliance with Existing Laws

BSFIs are also required to comply with the digitization of customer records under relevant BSP and Anti-Money Laundering Council issuances, as well as user consent and data sharing and protection/privacy laws.

Philippine Identification System (PhilSys)-Enabled e-KYC

The Philippine Identification System (PhilSys)-enabled e-KYC is an acceptable system under Republic Act No. 11055 or the PhilSys Act and its Revised Implementing Rules and Regulations. The launch of the PhilSys-enabled e-KYC is scheduled to be implemented by the Philippine Statistics Authority (PSA).

Implementation Timeline

Institutions that have existing e-KYC systems are given one year to comply with the prescribed e-KYC requirements, while BSFIs that intend to shift to an e-KYC system must comply with the new rules before implementing their new processes. Failure to comply may result in the institution not opening an account or conducting business relations with the customer.

Key Takeaways

  • All related transactions and attendant risks or obligations must be explicitly provided by the covered person, clearly understood and accepted by the customer.
  • The BSP is urging financial institutions to comply with the new rules to ensure a more efficient and secure financial system in the Philippines.