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KYC Rules Issued by BSP to Promote Easier Financial Inclusion

The Bangko Sentral ng Pilipinas (BSP) has recently released new guidelines for financial institutions’ use of electronic know-your-customer (e-KYC) processes, aimed at making it easier and more efficient for clients to verify their identities.

Background

According to Circular No. 1170, issued on March 30 and signed by BSP Deputy Governor Eduardo G. Bobier, the amendments aim to promote digital transformation and financial inclusion in the country. The circular amends rules on customer due diligence (CDD) and provides guidelines on e-KYC for banks and non-bank financial institutions.

Importance of E-KYC

BSP Governor Felipe M. Medalla emphasized that e-KYC is a key enabler of innovation and digital transformation, which will help advance the country’s financial inclusion agenda. “E-KYC is one of the key enablers to promote innovation and digital transformation aimed at advancing our financial inclusion agenda,” he said in a statement.

New Rules

The new rules require banks and other financial institutions (BSFIs) to use strong information technology architecture and adopt tiered or risk-based e-KYC policies and procedures. BSFIs are also required to conduct customer identification and verification using different methods, including e-KYC through digital ID systems.

Key Requirements

  • Identity proofing can be done digitally, physically, or both
  • Authentication and credentialing must be in digital form
  • Robust technology, adequate governance, processes, and procedures are essential for accurate results
  • Institutions must obtain explicit consent from customers for e-KYC
  • Data processing, storage, and management practices must conform to relevant laws and regulations

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 will be launched by the Philippine Statistics Authority (PSA).

Timeline for Compliance

  • Institutions with existing e-KYC systems have one year to comply with the new requirements
  • Those planning to shift to an e-KYC system must do so before implementing their new processes

Consequences of Non-Compliance

Institutions that fail to comply with CDD measures may not open accounts or conduct transactions, and may be required to file a suspicious transaction report on the customer.

Conclusion

The BSP hopes that these new guidelines will promote greater financial inclusion and efficiency in the country’s financial sector. By adopting e-KYC processes, financial institutions can reduce costs and increase accessibility for customers, ultimately contributing to a more inclusive and efficient financial system.