KUALA LUMPUR: Bank Negara will introduce regulations that allow for electronic know-your-customer (e-KYC) features in a move that would pave the way for more innovation in the financial world.
The additional rules will enable an industry-wide implementation of e-KYC for remittance transactions in the country, which the central bank has said would be operational by 2018.
KYC is the process of a business or financial institution verifying the identity of its clients in money transactions. The rule is an essential part of banking to prevent money laundering and terrorist-funding activities.
At the moment, most customers are required to be phycially present at branches to undertake large money transactions.
The e-KYC is an electronic and paperless method of doing this via a mobile application.
Bank Negara assistant governor Jessica Chew Cheng Lian said the central bank would issue the proposed regulatory parameters for the conduct of e-KYC processes for remittance transactions soon.
“We expect to finalise the standards for e-KYC by October after receiving industry comments.
“Following this, the existing requirement for face-to-face verifications for onboarding new customers will be removed for companies that have received the approval to conduct e-KYC,” she said in her keynote address at the Money Services Business Asia-Pacific Conference 2017 here yesterday.
Earlier this year, Bank Negara governor Datuk Muhammad Ibrahim said that the central bank hoped to operationalise an industry-wide implementation of e-KYC for the on-boarding of customers by 2018.
Chew said worker remittances had more than doubled to US$420bil between 2007 and June 2017, while the cost of money remittances has also fallen.
The global average for remittance cost has fallen from above 10% a decade ago to 7% in 2016, while the World Bank has a target of reducing costs to 5%.
In Malaysia, she said, the average remittance cost has been below 3% in 2016.
She noted that efforts to make remittance services more affordable and inclusive remained an unfinished agenda.
“In many countries, both developing and developed, informal remittance systems remain prevalent.
“There are legitimate reasons why such systems exist in some countries, for example countries that do not have fully-developed formal financial systems.
“At the same time, legitimate concerns exist over risks associated with such systems, especially in an environment where money laundering and terrorist-financing concerns have heightened,” she said.
However, Chew said Bank Negara was encouraged by on-going efforts in the industry to ensure that all companies were competent through mandatory anti-money laundering and to counter financing of terrorist training programmes.
“Having worked hard to build confidence and trust in the industry and to avert the damaging effects of de-risking that continues to be a key challenge in more than a few jurisdictions, actions by any firm to undermine the integrity of the financial system will be met with a strong regulatory response from Bank Negara,” she pointed out.
Commenting on the new regulations for e-KYC, Malaysian Association of Money Services Business president Ramasamy K. Veeran said it was “long overdue”.
“We have been waiting for it (the implementation of the e-KYC) for a long time,” he said.