By Lee C. Chipongian, September 29, 2021; Manila Bulletin

The central bank is updating and enhancing the rules on electronic know-your-customer (e-KYC) procedures to improve banks and non-banks’ customer identification with the national ID as an independent source of proving one’s identity in the customer due diligence (CDD).

The Bangko Sentral ng Pilipinas’ (BSP) proposed new e-KYC guidelines are currently being circulated to BSP-supervised financial institutions (BSFIs) for feedback and comments. The feedback due date is on October 12.

One of the features of the draft circular, in conducting CDD, is to add on the required minimum information in verifying customer identification such as other valid identification documents that BSP described as “reliable, independent source documents, data or information”.

Under CDD, the Philippine Identification System (PhilSys) has been added and recognized as the government’s central identification platform.

“In this regard (the) PhilSys-enabled e-KYC is recognized as an acceptable system for e-KYC using digital ID system in the Philippines,” said the BSP in the proposed circular. It said that BSFIs implementing e-KYC “must perform customer identification and verification under the same standards equivalent to those for face-to-face basis, and shall establish appropriate risk management processes.”

The BSP said PhilSys records are considered as official and sufficient proof of identity and a reliable and independent source of verification. The national ID or the Philippine Identification (PhilID) has undergone identity proofing, enrollment, authentication and “identity life cycle management processess”. It contains the PhilSys number, date and place of birth of the BSFI customer, nationality, address, and biometrics, among others.

“Where the 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,” said the BSP.

The draft rules also included other revisions to how BSFIs will conduct customer verification process and valid identification documents.

By BSP definition, e-KYC refers to the use of electronic or digital methods in the customer identification and verification process.

The draft circular said BSFIs are allowed to use different methods to conduct customer identification and verification including e-KYC through digital ID system.

“When employing e-KYC using digital ID system, the BSFI should ensure it is anchored on, among others, robust, effective, and reliable information and communication technology architecture,” said the BSP. “It shall adopt tiered or risk-based e-KYC policies and procedures depending on the assurance levels for identity proofing and authentication of the digital ID system used, if any,” it added.

Customer identification is a key element of KYC standards. Last year, the BSP’s Monetary Board eased the requirement rules for valid IDs for customer onboarding and transactions while Luzon and other areas are under lockdown, or during the period of enhanced community quarantine.

By temporarily relaxing the KYC procedures, the BSP said this should facilitate the delivery of welfare funds to identified beneficiaries who have no available valid IDs or transactional account with a bank or non-bank.