Financial Crime World

Title: Central Bank of Malaysia Embraces e-KYC: A Digital Solution to Customer Verification Amidst Movement Control Order

Introduction

The digital transformation of the financial sector has gathered significant momentum, leading to the increasing popularity of ’e-KYC’ (electronic-Know Your Customer). In light of this trend, the Central Bank of Malaysia (BNM) recognized the convenience and cost-effectiveness of this digitalization and published guidelines in June 2020. With the country under Movement Control Order for the second time, the demand for remote identification and verification has become essential.

e-KYC and Fintech: The Perfect Partnership

  • Fintech’s support for e-KYC comes as no surprise, given the historical intertwining of financial services and KYC.
  • Fintech businesses classified as financial institutions by BNM are required to adopt a combination of authentication factors during the identification and verification process.

Authentication Factors

  • Something the customer possesses: Identity card, registered mobile number, etc.
  • Something the customer knows: PIN, personal information, etc.
  • Something the customer is: Biometric characteristics.

Artificial Intelligence (AI) and e-KYC

  • Beyond identification and verification, AI technology is enhancing the effectiveness of e-KYC processes.
  • Facial recognition, optical character recognition (OCR), and fraud detection solutions contribute to streamlined KYC procedures.

Data Protection: Keeping Personal Information Secure

  • Given the increase in global cybercrime rates, e-KYC processes offer an additional layer of data protection.
  • As e-KYC processes are governed by the Personal Data Protection Act 2010 (PDPA), users can rest assured that their personal information will not be exploited.

AML/CFT and e-KYC: A Cohesive Approach

  • e-KYC plays a significant role in the fight against financial crimes such as money laundering and terrorism financing.
  • By requiring customers to verify their identities, businesses can assess potential risks and illegal intentions more effectively.

The Future of e-KYC

  • Given the growth and expansion of the Malaysian Fintech scene, the convenience, security, and efficiency of e-KYC represent the future of financial services in the country.
  • The arrival of digital banking and the increasing reliance on technology during the COVID-19 pandemic will further boost e-KYC adoption.
  • e-KYC’s ability to effectively respond to these changing market conditions will cement its place in the Malaysian Fintech landscape.