How To Enhance KYC Systems With Blockchain – Finextra

KYC and AML complicance can be considered as the most costly policies to implement and maintain. Furthermore, it is one of the factors holding back the financial innovation as early-stage startups have to deal with complicated processes, hire compliance teams and pay huge amounts to KYC data providers. And while many
digital banking platforms
already come with KYC and AML modules in place, there is still a gap to close before the full automation. Current KYC processes also entail substantial duplication of effort between banks (and other third-party institutions). While annual compliance costs are high, there are also large penalties for failing to follow KYC guidelines properly.

The average bank spends £40 million a year on KYC Compliance, according to a recent Thomson Reuters Survey, which also revealed that some banks spend up to £300 million annually on KYC compliance, Anti Money Laundering (“AML”) checks and Customer Due Diligence (“CDD”). 

Since 2009, regulatory fines, particularly in the USA, have followed an upward trend with record-breaking fines levied during 2015. On-going regulatory change, with no one internationally agreed standard, makes it increasingly hard for banks to remain compliant. Thus, as it can take such a long time to onboard a new customer because of lengthening KYC procedures, this is having an increasingly negative effect on customer experience.

Chris Huls of Rabobank proposed the use case that “KYC statements can be stored on the Blockchain.”

Once a bank has KYC’d a new customer they can then put that statement, including