Incorporating KYC into Distributed Ledger Technology Platforms

When I look back at the summary I wrote for the experiment conducted in 2019/2020, I feel a bit embarrassed at the lack of coherence and linguistic effectiveness of my language. Nonetheless, I take this as evidence that I have grown and become more competent. Unfortunately, this experiment never took off, as there is no feasible business model to maintain the proposed network for information exchange, irrespective of the good intentions behind it. We are studying whether distributed ledger technology (DLT) can make the existing Know Your Client (KYC) procedure, where fiscal institutions validate a person's identity before providing financial services, more efficient. There are two aspects to the inefficient nature of KYC, one from the point of view of the FI and the other from the viewpoint of the customer. A more progressive approach for FIs would be to exchange customer information which has been gathered through KYC, together with certification of the accuracy of the customer data. This could create an opportunity to reduce some of the costs associated with KYC, as well as introducing competition where the first FI to gain the customer and authenticate the identity document could gain a small income from the reuse of their substantiation. Nevertheless, the seemingly insurmountable obstacles to sharing Personally Identifiable Information (PII) make this forward-looking way of doing things feel far away. FIs must be accountable for (1) providing a secure environment to keep PII safe; (2) making sure that PII is only used as it was intended; and (3) ensuring PII is shared only with the consent of the individual. A firm must provide evidence of their identity to any FIs with which they wish to have a business relationship. This evidence often takes the form of paper documents, stored securely and provided each time verification is required. Once a business partnership has been established, the FIs, in accordance with their internal regulations and protocols, may require firms to resubmit documentation to prove their identity in different formats for the provision of distinct financial services or even for each transaction. This can become a burden for firms very quickly. The inherent characteristics of blockchain have the capability to construct a network that enables identifying information to be shared in a way that adheres to principles of security, privacy and confidentiality. in part, quite complex. It is anticipated that the internal operation of this network may be rather intricate in some ways. going to be implemented The workflow that is planned to be put into effect will be implemented. The same 7 step processing can also be used for Client Due Diligence, which typically involves validating a client's identity information at predetermined intervals. Records of these periodic due diligence checks can be kept in the network. By utilizing this type of network, FIs can benefit from the sharing of the KYC insights/outcomes, without deliberating on the confidential identity data. This can lead to streamlining the KYC and CDD process, enabling FIs to trust and accept the attested identity information from other FIs or notaries, thus eliminating the need to conduct separate due diligence.

Source: https://medium.com/@notherArmchairEconomist/implementing-know-your-client-kyc-process-on-distributed-ledger-technology-dlt-10f208011c41?source=rss------fintech-5