KYC changes to boost fintech sector
Productivity Commission ushers in the new ‘data’ age
Draft report invites comments by 12th November 2016
Sources: Fintech Business; King & Wood Mallesons
Point of View
The wording in the amended regulations “Anti‑Money Laundering and Counter‑Terrorism Financing Rules Instrument 2007 (No. 1)” is changed such that information verified, at a minimum, a customer’s full name and either the customer’s date of birth or residential address. Information collected must be based on reliable and independent documentation or electronic data or a combination of the two. The change is to allow a risk based approach.
This seems to be part of a wider set of government initiatives to try to open-up access to data at banks to customers and nominated third parties. Following the publication of the Treasury’s “Backing Australian FinTech” report in March 2016, the Productivity Commission investigated whether banks should be forced to share more data on customer transactions. A draft report was published on 3rd November 2016 for comment by 12th November 2016.
Productivity Commission Chair, Peter Harris, is quoted as saying ‘We are proposing the creation of a Comprehensive Right to data control for consumers that would give people the right to access their data, and direct that it be sent to another party, such as a new doctor, insurance company or bank. Plus an expanded right for people to opt out of data-collecting activities. And existing privacy laws would all remain in place,'' he said.
Other markets have pushed the banking sector to be more open, such as in the UK where the Competition and Markets Authority’s (CMA) retail banking market investigation published in August 2016 defined a series of remedies to make UK banking more competitive and in the EU with Payment Services Directive 2 (PSD2) that was approved by the EU in January 2016 and will be written into member states’ laws in January 2018. For PSD2, the European Banking Authority (EBA) is tasked with defining the regulatory security standards that will apply.
Regulatory push to open access to payment networks and bank data is common across a number of developed countries and with Productivity Commission’s report Australia is moving in the same direction. Development of the technical and business standards that support these activities is likely to be a complex and expensive process to satisfy the many stakeholders involved. It is important that banks take a leading role in the implementation programmes to ensure that trust built up over many years is maintained.
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