I registered for the national identity card in 2017.
During the mass registration exercise, a National Registration Bureau (NRB) official scanned my fingerprints, took a passport-size photograph and captured my signature through the signature pad.
All this information is stored centrally on the NRB database along with my name, date of birth, sex and other related information that was captured from the form.
A few months later, I was issued with a physical card. The national identity card has a chip with the capability of storing information which identifies me as an individual and allows me to access several services.
I have, among other things, used the card for the mandated SIM registration, registering for mobile money wallet and opening a bank account.
During these processes, the service providers requested for my ID card because they needed to verify that I was who I claimed to be.
The process of identifying and verifying a customer’s identity is known as know-your-customer (KYC). It is an important process required by law as a means of customer due diligence.
In line with the Financial Crimes Act of 2016, which governs this requirement in Malawi, the Financial Action Task Force on Money Laundering (FATF) states:
“Financial institutions are required to identify and verify a customer’s identity using a reliable source document or data as part of establishing a business relation or during the course of the business relationship.”
FATF is an international body that drives the global fight against money laundering and terrorist financing.
Most financial institutions in Malawi have a manual KYC process which requires that the customer brings in his or her original identification document. This is then verified to establish that it is authentic and a copy of the original ID is made and kept for record purposes.
The National Payment System, second-quarter report for 2021 published by the Reserve Bank of Malawi (RBM) states that the central bank along with other business partners participated in the launch of the integrated electronic KYC (e-KYC) project in the period under review.
The e-KYC platform will have an interface with the NRB since the national ID card is the primary source of identification for KYC.
E-KYC allows for the verification of someone’s identity without the use of a physical original document. Different methods can be used to identify a person among which are the use of biometrics—i.e. scanning finger print, scanning the eye and scanning the face— or entering a valid ID number.
India is one of the countries that has put e-KYC to use. The world’s second most populated nation has a digital identity for its citizens called unique identification number (UID), popularly known as aadhaar.
Once an individual has enrolled for aadhaar they are provided with a unique number which identifies them. This number is linked to the biometric and demographic details of the individual and stored in a database.
Banks have access to this information and can, therefore, use the same to verify the identity of an individual with his or her consent.
An individual can go to a bank, have fingers scanned on a fingerprint reader and if the information matches with that which is on the UID server, the bank can instantly open an account for the customer.
Among its advantages, e-KYC reduces paper-based procedures, filing and paper-based records as well as fraud.
E-KYC curbs the use of fake IDs.
A quick and seamless onboarding process will result in financial institutions operating more efficiently. This will entice potential customers and consequently grow an institutions’ customer base.
Besides, customers will be able to access financial services quicker and it will be easier for institutions to comply with anti-money laundering legislation.
E-KYC might be expensive to implement as financial institutions would need to invest in biometric devices and other IT infrastructure, but the advantages outweigh the costs.