New Rules for Electronic Know-Your-Customer (e-KYC) Procedures Announced by Bank Negara Malaysia

Date: 29 April 2024

Bank Negara Malaysia (BNM) has issued a new policy document on Electronic Know-Your-Customer (e-KYC) procedures along with a set of frequently asked questions (FAQs) on 15 April 2024. This document supersedes the previous policy issued in June 2020.

Application of e-KYC Policy

The e-KYC policy applies to various financial institutions (FIs), including:

Licensed banks
Investment banks
Life insurers
Islamic banks
Family takaful operators
Prescribed development financial institutions
Approved issuers of designated payment instruments
Approved issuers of Islamic payment instruments
Licensed money services businesses

Purpose of the Updated Policy

Ensuring safe and secure application of e-KYC technology in the financial sector
Facilitating BNM’s oversight capabilities
Maintaining effective anti-money laundering, countering financing of terrorism, and countering proliferation financing (AML/CFT/CPF) control measures

FI Obligations

FIs must:

Obtain board approval for overall risk appetite and internal framework for implementing e-KYC solutions
Use secure and effective authentication factors
Identify and verify individuals through document verification, biometric matching, and liveness detection
Verify legal entities by establishing business legitimacy, identifying and verifying the entity, the appointed authorized person, and beneficial owners
Assess risks and classify potential legal entities
Perform due diligence on technology provider and e-KYC solution

Technology Provider Requirements

Assessed by an independent external assessor
Certified where possible

Continuous Monitoring

Address potential e-KYC solution vulnerabilities
Meet requirements for higher-risk financial products

Compliance by Money Services Business Sector

Entities in the money services business sector must comply with e-KYC identification and verification requirements for both individuals and legal entities.

Record Keeping

Maintain and make available records of e-KYC solution performance on a monthly basis for BNM review.

Regulatory Process

The regulatory process for FI implementation of e-KYC varies depending on FI type, with some FIs able to implement after 14 working days while others requiring BNM approval.

Enhancements to e-KYC Requirements

assessment of three modules of the e-KYC solution by an external independent assessor
alternative safeguards for onboarding individuals without existing bank accounts

For further information about e-KYC procedures, refer to the Revised Policy Document and its accompanying FAQs.

About the Authors

Lee Ai Hsian: Partner, Banking and Finance Practice, Skrine
Javene Fan: Associate, Banking and Finance Practice, Skrine