In a piece of legislation passed just a couple of weeks ago, the government of Vietnam made it possible for banks to comply with a common anti-money laundering, or AML, requirement digitally. Know Your Client, or KYC, has long been an element of Vietnam’s banking law and serves to supplement the global standard AML law. But for those who don’t keep up on banking law in Vietnam, a brief primer is required.
What is KYC?
According to the Thales Group (here):
KYC or KYC check is the mandatory process of identifying and verifying the identity of the client when opening an account and periodically over time.
It is a process of checking the identification documents of applicants against public and sometimes government data sources to ensure that the identification is accurate and real and that the person applying for an account is who they say they are.
In most countries this process began as a hands on physical process that involved checking documents against the living person who visited a bank branch before being able to open an account. But now that more and more people are looking to open accounts without actually stepping foot inside a bank branch, or through other financial institutions that may not have a physical location to allow for such face-to-face confirmation, the need for a digital method has become increasingly clear.
From 2014 onwards, the process of KYC in Vietnam required banks to physically interact with the documents, even for those applications submitted digitally, and to confirm their legitimacy by a physical inspection or, if copies, by requiring a notary seal be attached testifying that the copies were accurate per the originals. This demand for meeting with the client and then comparing documents with his avowed identity is time consuming and–in light of the difficulties of face-to-face meetings in Covid times–could be very inconvenient for the parties. Thus, eKYC.
eKYC in Vietnam
The government has been considering the introduction of satisfying the KYC requirements through digital means for some time, but it wasn’t until this month, 4 December 2020, that they promulgated a Circular that modified existing rules and included a process for electronic KYC, or eKYC. This process only applies to Vietnamese citizens and enterprises applying for an individual account. It does not provide for foreigners to open bank accounts or for applications of jointly held accounts.
Before they are allowed to conduct eKYC, banks–including foreign bank branches–must establish a process and procedure for implementing the following steps according to the circular and several related laws including:
- the collection of the same documents as were required for regular KYC: an application form per the bank, a personal identification document such as a national ID or passport,
- the performance of an examination and investigation of the documents of the applicant,
- warn the applicant about the process of conducting KYC via electronic means and the procedures that may be different from traditional KYC,
- announcing to the applicant the results of the eKYC investigation and open the account by providing the number and any limitations on the account to the customer.
In developing this procedure, banks have the right to decide the method, form, and technology to be used, so long as the same meets the following minimal requirements:
- it must be sufficient to obtain information about the client and to confirm her as the client, Some examples include certain immutable characteristics of the client such as her voice, her face, her fingerprints so long as they are very hard to fake and have a high degree of accuracy,
- it must contain a method for confirming the name of the client on the application form,
- it must also include a method for monitoring the identification of the client throughout the life of the account, compare that information to government watch lists, and be capable of putting a hold, seizure, or other actions on the account if necessary, and
- it must be able to maintain and secure the records of the eKYC investigation and the client’s identity and application documents throughout the life of the account and as elsewhere required by law.
Accounts opened using eKYC must be limited to a transaction amount of 100 million VND per client per month except for five specific cases:
- the confirmation of identity was conducted via a video call that must meet certain standards of quality and security;
- the bank uses public documents to confirm the identity of the client;
- after conducting the investigation and confirmation on the received documents, the bank meets the owner of the account face-to-face;
- the transfer is made to another account in the same bank;
- the customer is making a payment on a portion of a loan held by the bank at which he opened the account in question.
While much is left to the individual bank in determining the level of technology used and the specific methods of confirming a client’s identity, the process is essentially in place and the allowance for banks to actually begin implementing eKYC in Vietnam is secure. Remember, though, that the same requirements of confidentiality and security remain. While a few items were additionally amended in this circular, the process for eKYC is the most notable among them. Banks will be able to implement the new laws beginning on 5 March 2021.
If you have questions about eKYC, KYC in general, AML procedures, or banking issues please feel free to contact us at our website at www.indochinecounsel.com. Or you can find my work email on the author bio page.