IFC & BFIU to develop eKYC online authentication system

International Finance Corporation (IFC) has signed a cooperation agreement with Bangladesh Financial Intelligence Unit (BFIU) for implementing and scaling up an Electronic Know Your Customer (eKYC) project in Bangladesh on Monday.

Officials of the central bank said that under the agreement, IFC and BFIU will work together to develop and adapt eKYC infrastructure, which is a foundational regulatory arrangement for conducting customer due diligence during new client on boarding process for collecting and verifying customer data electronically in opening of new accounts at banks, non-bank financial institutions, mobile financial service providers, insurance companies, and capital market intermediaries.

"Financial sector, especially financial institutions, are experiencing a drastic process of digitalisation. This digital transformation enables easy access of customers, even from the remote location, into the financial services. This may pose some underlying risk of money laundering, terrorism financing and related criminal activities by abusing financial institutions and its services. To minimize such risk in the financial sector e-KYC can be one of the most optimal solutions" said Md Masud Biswas, executive director & deputy head of BFIU.

"Promoting financial inclusion is one of the priorities for IFC's work in Bangladesh. The implementation of eKYC infrastructure will offer seamless experience for end users and support the financial sector to reach out to last mile customers in Bangladesh, significantly increasing access to financial services", said Qamar Saleem, IFC's regional manager for advisory services for financial institutions group in Asia and Pacific.

The process is time-consuming, costly, and inconvenient for both clients and FIs. Moreover, in-person account opening has become more difficult amid the Covid-19 pandemic and the development of eKYC will help in social distancing, officials said.

The project will contribute to the financial inclusion agenda of the government of Bangladesh as well as IFC's target of including an additional 30 million unbanked adults in the country by 2030, according to Bangladesh Bank officials.  

BFIU is expected to issue a comprehensive eKYC regulatory guideline for the financial sector by December 2024.

Along with establishing a regulatory infrastructure, the eKYC project will also deliver data analytics, case studies, knowledge creation and dissemination and awareness building in the financial market. IFC estimates that 500,000 people will be covered by the eKYC system by the end of the project implementation period in 2025.

Earlier, for conversion from manual KYC to eKYC, BFIU ran a small-scale testing by opening 1,500 accounts using eKYC technology, such as biometrics, and the results confirmed its effectiveness.