The platform will support regulatory oversight of banks' collection and management of KYC data
The creation of Know Your Customer (KYC) blockchain platform is credit positive for UAE banks, as it will support the asset quality of the banks mainly by reducing operational risk.
On 19 February, the Dubai Department of Economic Development's Competitiveness Office and six banks announced the formation of a consortium of six banks and licensing authorities in the United Arab Emirates (Aa2 stable) for sharing verified Know Your Customer (KYC) data.
"The platform will facilitate faster and more secure onboarding, and exchange of authenticated and validated digital customer data and documents through distributed technologies powered by blockchain. This will ensure improved compliance with local and international KYC regulations while reducing the risk of data theft," Mik Kabeya, Assistant Vice President-Analyst at Moody's said.
The six banks that are part of the KYC blockchain consortium are: Emirates NBD, Emirates Islamic, HSBC Bank Middle East Limited, The National Bank of Ras-Al-Khaimah, Abu Dhabi Commercial Bank and Commercial Bank of Dubai.
These banks together held around 44 percent of total banking assets in the UAE as of June 2019.
Ali Ibrahim, Deputy Director General of Dubai Economy, said: “The platform will offer a digital ‘Instant Bank Account’ functionality, allowing for faster and less cumbersome onboarding journey with banks and significantly improving the experience of new investors looking to establish themselves in the UAE.”
Non-compliance with KYC regulations, particularly for anti-money laundering and terrorist financing, can have material legal implications and result in sizeable penalties for banks. Theft of client data can cause material reputational damage.
The platform will support regulatory oversight of banks’ collection and management of KYC data. "We also expect it to help credit risk management with better data for client underwriting and debt collection," Kabeya said.
The KYC blockchain platform is in line with the Dubai Blockchain Strategy and is expected to be launched in the first quarter of 2020.