Govt to simplify KYC process, offering ease and efficiency for banking customers

KATHMANDU: The government is set to simplify and streamline the detailed Know Your Customer (KYC) requirements necessary for opening accounts at banks and financial institutions. The arrangement will allow banks and financial institutions to use the comprehensive information provided by Nepali citizens when registering for a National Identity Card.

This provision has been included in the “Anti-Money Laundering Rules, 2081,” which were issued last Thursday. Rule 3 of these regulations now incorporates provisions for “identifying customers through electronic means.” Under this arrangement, banks and financial institutions will be able to access and view customers’ personal information from the digital records maintained by the Government of Nepal. Individuals will need to have their citizenship and National Identity Card for this to be possible.

Streamlined KYC Using National Identity Card Information

Under the new regulations, banks and financial institutions will soon be able to access detailed personal information that Nepali citizens provide when registering for a National Identity Card. This provision has been incorporated into the recently issued “Anti-Money Laundering Rules, 2081,” and it marks a groundbreaking development in digitizing and streamlining the KYC process.

Previously, individuals were required to fill out separate KYC forms for every account they opened, which led to considerable inconvenience and the risk of sensitive information being unnecessarily exposed. By digitizing the system and enabling access to government-maintained records, the government aims to mitigate these challenges.

Access to Digital Government Records

The updated rules, specifically Rule 3, include a provision for “identifying customers through electronic means.” This means banks and financial institutions can now retrieve personal information such as name, gender, age, citizenship details, and contact information from Nepal’s digital government records. For this to be effective, individuals will need to have registered for either a citizenship certificate or a National Identity Card.

With the new system, banks will still need to reverify the collected details with the customers, but this re-verification will be more seamless compared to the traditional methods. Additional personal information will only be accessed with the explicit consent of the account holder, ensuring that data privacy remains a top priority.

Key Benefits of the New System

Reduced Bureaucratic Hassle: The new system eliminates the need for individuals to repeatedly fill out lengthy KYC forms for each account. This will significantly reduce the administrative burden on both customers and financial institutions.

Improved Data Security: By centralizing personal information and using a digital verification process, the risk of sensitive details being exposed is minimized. The requirement for explicit customer consent before accessing further information provides an additional layer of security.

Enhanced Customer Experience: With electronic access to personal data, banks and financial institutions can speed up the account opening process, providing a more efficient and customer-friendly experience. This is particularly beneficial for those unable to visit a bank in person, as KYC verification will be possible through digital means, including video calls.

Broader Applicability: The streamlined KYC process will also be beneficial for other institutions such as the Office of the Company Registrar and share trading agencies. This wider implementation supports a more integrated and efficient financial ecosystem in Nepal.

Government Steps for Implementation

Nepal Rastra Bank spokesperson Ramu Paudel highlighted that the new rules will be implemented through amendments to existing directives. The central bank will issue circulars to licensed institutions, ensuring they have clear guidelines for integrating the electronic KYC system into their operations.

While there is already a provision for digital KYC verification, it currently requires individuals to submit documents online and complete the process through video calls. The new rule, granting banks access to the government’s digital database, promises to make the entire system more organized and robust.

The government will designate a specific agency, such as the Ministry of Home Affairs or the Department of National Identity Cards, to oversee the data provision. This structured approach will enable banks and financial institutions to seamlessly identify and authenticate customers, ensuring compliance with anti-money laundering regulations.

The new regulations signify a critical shift toward digital transformation in Nepal’s financial sector, offering significant benefits to both customers and financial institutions. As the nation continues to modernize its financial infrastructure, the simplification of KYC processes marks a step forward in enhancing efficiency and safeguarding data privacy.