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Financial institutions fined nearly $11B worldwide for KYC, regulatory non-compliance

Philippines, India step up
Financial institutions fined nearly $11B worldwide for KYC, regulatory non-compliance

Financial institutions worldwide were fined US$10.6 billion for regulatory non-compliance including anti-money laundering (AML) and Know Your Customer (KYC) in the fiscal year 2020 according to the AML/KYC Tracker by PYMNTS and Trulioo.

PYMTS reports that digital fraud against consumers increased 24 percent in the period from January to April 2021 compared to Q4 2020. While digital onboarding has brough efficiencies and reduced some human error, but regulation compliance remains a challenge especially international compliance.

Payment fraud (59.6 percent), data security (54.6 percent) and long completion periods (49.8 percent) are among leading friction points for cross-border payments, according to the AML/KYC Tracker. The report, which sees technological opportunities for the sector especially if banks and financial institutions are prepared to outsource to fintech specialists.

India is looking to monetize biometric KYC verification via its digital identity authority and the Philippines is consulting with its financial sector on how to integrate its digital ID system with eKYC.

India’s digital identity authority to charge 3 rupees per Aadhaar eKYC

Draft regulations seen by MediaNama show that the Unique Identification Authority of India (UIDAI) will charge private organizations 3 rupees (US$0.04) for every successful authentication of a user through Aadhaar biometrics or OTP-based digital KYC, up from the previously suggested Rs. 1 fee. The charge for a yes/no authentication request will be half a rupee (¢0.7) whether or not it is successful.

Government bodies will be exempt in the proposals and the UIDAI is accepting feedback on the draft until 6 October. The fees will be reviewed every two years. Institutions will have to pay a separate license fee for having a connection to Aadhaar.

The Reserve Bank of India has allowed payment service providers and NBFCs (Non-Banking Financial Companies, which do not have a full banking license) to apply for an Aadhaar digital KYC authentication license, which is being seen by the fintech sector as a way to promote digitization and improve fraud checks, reports the New Indian Express.

NBFCs are currently reliant on offline Aadhaar validation and paper-based authentication systems.

Philippines financial institutions to consider digital KYC, PhilID integration

Financial institutions in the Philippines have until 12 October to feedback on a draft circular from the Bangko Sentral ng Pilipinas (BSP) seeking compliance with eKYC, including through the country’s fast-growing digital ID system, reports Business World.

Institutions would have to digitize customer records in line with BSP’s existing anti-money laundering regulations. The digital KYC process is expected to include authentication and identity lifecycle management, with authentication done using multiple factors.

“Where the Philippine Identification (PhilID) is submitted by the customer, the PhilID shall be accepted, subject to proper authentication, as a sufficient proof of identity, and the covered person shall no longer require additional document to verify the customer’s identity,” the circular is quoted as saying.

Near the end of August, reports indicated 108 million people had gone through the form-filling Step 1 of signup for the PhilID and 24 million had had their biometrics captured as Step 2, though PSA says 30 million had completed registration by the end of the month.

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