KYC Sharing or ‘Know Your Customer’ Sharing is the buzzword these days delineating the facilitation of prospective investors opening an account with securities brokers or other service providers including banks, Asset Management Companies, and insurance companies. Before we talk about KYC Sharing, let us give a brief about KYC itself. KYC is the “Know Your Customer” process whereby service providers such as banks and brokerage houses assess the veracity of their customer’s identity. It is a process which takes place at the time of account opening for verification and identification of the individuals applying for the opening of their account.
In case of brokerage accounts, previously, the verification of identity of customers used to take place through a manual process enabled by a multiple-page brokerage account opening form. This was 12-15 page application form which was meant to be filled out by account holders in order to open their brokerage account. This was not only a cumbersome process for the customers themselves but also spelled out a significant amount of workload for the brokerage houses.
Now, however, as things have become simplified and digitised, so has KYC. Post-Covid and the facilitation and enhancement of digital platforms that it brought with it, KYC Sharing has become a reality. Under this facility, in case of the capital market, banks which have records of their account holders can share the information of their customers with brokerage houses opening the accounts of those customers. This way the cumbersome process of the multi-page form filling has been curtailed and now only an abbreviated form is required to be filled out by customers wanting to open a brokerage account.
The story behind KYC Sharing dates back to September, 2020, when the Roshan Digital Account (RDA) was introduced by State Bank of Pakistan (SBP) to facilitate Non-Resident Pakistanis (NRPs) to open a bank account with local banks through online or digital channel. RDA enabled account holders to have access to all conventional account services such as funds transfer, bill payments, and e-commerce, among other services. Gradually, the RDA portfolio of services was expanded with the support and cooperation of Pakistan Stock Exchange (PSX), the able guidance of the Securities & Exchange Commission of Pakistan (SECP), as well as partnering banks & brokerage houses to include Roshan Equity Investment (REI) account facility. Through the REI account, NRPs can open a brokerage account with select brokerage houses, allow sharing of their account opening information with the Central Depository Company (CDC) & National Clearing Company of Pakistan Limited (NCCPL), and invest on Pakistan Stock Exchange. It was the REI facility which led to the enabling of customer information sharing by banks with brokerage houses for NRPs. This was the foundation that capacitated the sharing of customer information by banks with brokerage houses for Pakistani residents & citizens as well. Before RDA, there were the regulatory as well as infrastructural barriers that limited the availability of KYC Sharing. However, now the regulatory frameworks have been upgraded to include KYC Sharing provisions to facilitate account opening through the online channels as well for local investors.
KYC Sharing has been a blessing in terms of the fact that it supports ease of account opening for service providers, specially for securities brokers of the capital market. This facility will go a long way in helping to increase the number of Unique Identification Numbers (UINs) and in facilitating investors to enter the capital market with ease and convenience.