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The problems around KYC for new financial services, especially for new entrants, might be mitigated by the introduction of a financier services passport based on modern technology and not stupid bits of paper.

There was a great story on BBC Radio recently. It caught my attention because it demonstrated faults with our useless and outdated cheque payments system and our useless and outdated identity infrastructure at the same time.

A listener posted a cheque for £36,000 to his bank. It was stolen and paid in by someone else to an account in approximately his name. £20,000 was withdrawn. Barclays, his bank, have agreed to refund him only the balance of £16,000. What are his rights? And will the new cheque imaging service be any safer and quicker?

[From BBC Radio 4 – Money Box, Wonga woes]

During the episode, the bank is quoted as saying that their cashiers are not experts in identification. Indeed, They are not. Which is why the business case for KYC and AML and ATF stuff is so confused. What is the point of asking people to present documents that cannot possibly be verified? How is the poor chap at the bank counter expected to know whether my Portugese fishing licence is still valid or not? Clearly the fraudster had to present some documents to open the account.

If you’re applying for a Barclays Bank Account or a Premier Current Account you’ll need to show us 2 valid and original documents from the list below –  one from the proof of ID list and the other to give proof of your current UK address. The same document cannot be used to verify both your identity and your address.

[From Identification for bank accounts]

Clearly, the documents presented were fraudulent. I’m not picking on Barclays, obviously. This is a general problem across jurisdictions and banks. While it is complicated and expensive and annoying for legitimate customers and business to comply with stupid KYC requirements, it is apparently trivial for the criminals to do so.

There is no point having an identity infrastructure where it is impossible to verify identity. On the other hand, an infrastructure that means identity is verified at every turn is invasive and open to abuse. We have a system that delivers neither, and costs a fortune.

KYC Exchange estimates that whereas a KYC request might take 30 – 50 days to turn around using standard industry measures, its own system can do the same work in five minutes. The time saved for a bank initiator is estimated at approximately 90%, while the receiving bank saves around 40-50%, according to von Hänisch.

[From Cost of KYC too high says Swiss start up » Banking Technology]

Maybe KYC Exchange could then issue a Financial Service Passport of some kind? There’s a thought. I’ve been with Barclays for 37 years: perhaps they could provide me with some sort of app on my smartphone that I could use to present KYC credentials when I want to take out insurance or get a mortgage or rent a house or anything. This is the sort of thing that I think we will be discussing at techUK next Monday, where Ian Jenkins of Deloitte and I will be chairing a discussion around the concept:

A ‘financial services passport’ refers to an aspirational digital identity, issued by UK financial services providers, and mutually recognised across the financial services industry. Such an interoperable digital identity could be utilised to correctly identify and authenticate end-users with appropriate security in a wide variety of circumstances and across a wide variety of channels.

[From Workshop: Towards a Financial Services Passport]

Look forward to seeing you there.


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