First Phase Of KYC Blockchain Project Ends In Abu Dhabi Global Market
Abu Dhabi Global Market (ADGM) started work on a trial for the know-your-customer (KYC) protocols involving blockchain technology, which began in February this year. The process would theoretically allow customers to be verified once, rather than multiple times for the same entity. As of December 4th, based on a press release from ADGM, the first stage of the trial has finished, which was performed by both ADGM and the Financial Services Regulatory Authority (FSRA).
Along with the two regulatory bodies involved, the trial also included an audit from KPM, deeming this initial phase “successful.” The review of the legacy KYC systems in place took about four months’ worth of data, showing that the present system was “cumbersome, repetitive, and cost intensive.”
As a result, those protocols weren’t proving the local banks and platforms with enough information to truly monitor accounts and customer compliance. The banks involved included Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, and First Abu Dhabi Bank, among others.
During the trialing of this new blockchain-based system, auditors discovered that it could “radically simplify” the entire KYC process, since it offers an “immutable audit trail, seamless and secure data sharing.” This method could also make it possible for customers to have more control over the release of their data, which lines up with customer consent requirements and data protection (GDPR) necessities.
The review notes that digital, signatures, cryptography, and other features make it possible to create a system that holds up the KYC standards throughout the country, while keeping security in place.
Richard Teng, the CEO for ADGM, said,
“By harnessing the power of technologies such as blockchain, the e-KYC project has demonstrated tangible benefits that may be offered by an e-KYC utility for financial institutions in the UAE. In addition to enhancing KYC checks across the industry, the utility can achieve significant cost efficiencies and financial inclusion driven by unified KYC standards.”
There’s also the potential for creating a commercial model of this endeavor, providing incentives to contributors for the uploading of data. The incentives would be through a fee-based rewards system, which may be funded by charging data customers to access the content.
After this first successful phase, the next step is for the FSRA to launch the second phase. During this subsequent stage of the trial, the researchers will work on the enterprise access of small and medium companies for banking services.