R3 building shared KYC blockchain service with banks
R3 and ten of its consortium member banks have developed a proof-of-concept for a blockchain KYC registry.
BBVA, CIBC, ING, Intesa Sanpaolo, Natixis, Nordea, Northern Trust, Société Générale, UBS and US Bank are all involved in the project.
The scheme uses distributed ledger technology (blockchain) to address the challenges associated with satisfying KYC requirements and allows identities to be managed by their owners.
KYC, short for know your customer, is an intrinsic element of modern day banking to prevent against fraud, corruption and money laundering.
However inconsistent standards, long turnaround times and duplicative processes have created inefficiencies in the existing model.
Additionally, increasing complexity and rapidly rising costs are putting a strain on customer on-boarding processes.
A recent study conducted by Thomson Reuters shows that some financial institutions are spending up to $500m annually on ensuring compliance with KYC and customer due diligence.
The creation of a shared KYC service on R3’s Corda platform would allow participants to create and manage their own identities including relevant documentation.
They can then permission other participants to access this identity for client onboarding and KYC purposes.
For additional validation, they can request authoritative participants for attestations against the identity.
Only those with a need to see it will have access.
The proof-of-concept demonstrated how distributed ledger technology can help banks fulfill basic KYC requirements of new customer onboarding while providing increased transparency, security and cost-efficiencies.
In addition, it provided bank clients with a single interface for managing their global identity, which in turn simplifies and streamlines the onboarding process.
“The growing complexity and cost of KYC compliance requirements presents a major challenge for banks on-boarding new clients and is having a negative impact on those client relationships,” said David Rutter, R3’s chief executive.
“Distributed ledger technology can provide a unified view of clients whilst also significantly reducing costs and time spent verifying identity.”
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