Financial Crime World

Title: Estonia’s New KYC Solution: A Single, Interoperable Profile to Streamline Business and Boost Economy

Estonia’s KYC Challenge

In Estonia, the Know Your Customer (KYC) procedure is an integral part of various transactions, including:

  • Opening bank accounts
  • Notarial transactions
  • Loan applications
  • Online fund transfers
  • Insurance contracts

The objective of the KYC process is to ensure the identity and compliance of individuals and entities. However, it is currently creating bottlenecks in the Estonian economy due to its fragmentation.

The Promise of a New Solution

To address these challenges, a new application or portal is being developed that:

  • Automates the KYC process
  • Creates interoperable profiles
  • Allows data sharing between relevant parties
  • Accesses multiple trusted databases

Building a Interoperable KYC Profile

A person’s KYC profile can be automatically populated with common data from various sources:

  1. State databases
  2. Third-party databases
  3. State databases from other countries
  4. Private databases (banks)
  5. Self-added files and information

Current Challenges

The current KYC process presents several challenges:

  • Fragmentation: Every obliged entity handles KYC checks differently, leading to duplicated efforts and high costs.
  • Lack of standardization: The absence of standardized KYC processes makes the task more complicated.
  • Reliance on manual processes: Many entities still use paper-based or in-person procedures.

Advantages of the New Solution

The new KYC solution offers the following advantages:

  1. Nationally validated data: Enables accurate risk prevention and detection and reduces duplicated checks.
  2. Interoperability: Allows for reusable profiles that can be easily shared across obliged entities.
  3. Centralized data access: Acts as a central hub, allowing for quick and efficient data exchange, reducing manual data entry and bureaucracy.
  4. Improved data management: Supports machine-readable data, enabling automated data management and analysis, increasing accuracy and risk prevention.
  5. Enhanced data privacy: Users have control over their data and can choose which information to share.

Distinguishing Features of the New Solution

Compared to other existing solutions on the market, this new KYC solution offers several unique advantages:

  1. Person-initiated data collection: Individuals initiate their KYC data collection and transmission, maximizing control and ensuring data accuracy.
  2. Always-updated profiles: Makes it easier for obliged entities to access the most current data, reducing risk of outdated or incorrect information.
  3. Original source data: Orientated towards using original sources for data collection, ensuring the highest level of accuracy and reliability.
  4. Data exchange between obliged entities: Allows for the most effective use of shared information, improving efficiency.
  5. Returning data to the state: Ensures continued accuracy and completeness by enabling the return of KYC data to the state.

Conclusion

Estonia’s new KYC solution offers a novel approach to managing customer due diligence processes, saving time, resources, increasing efficiency, and fostering a business-friendly environment. Through person-initiated data collection, leveraging original sources, and promoting data sharing, this solution aims to streamline the KYC process, reduce bureaucracy, and encourage economic growth.