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SnT and ABBL Collaborate on FinTech KYC Solution

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Published on Tuesday, 13 June 2017

All financial institutions are subject to strict Know Your Customer (KYC) regulations, according to which client identity must be carefully verified. This helps to avoid money laundering and facilitates prudent risk management. These regulations apply equally to all financial institutions in Luxembourg, and yet due to the possibility of the manipulation of digital identification documents, it is not currently possible to outsource KYC processes; this lack of trust means banks tackle KYC internally at considerable expense.

A team of researchers at SnT, led by Dr Radu State, head of the SEDAN research group, together with Dr. Zsofia Kräussl, Luxembourg School of Finance, will work with a cluster of 45 ABBL members involved in FinTech to solve this problem. They will develop an innovative solution using Distributed Ledger Technology. A distributed ledger is a database shared and synchronised across numerous organisations (the blockchain system behind Bitcoin is a well-known example of such a ledger); information on the ledger can therefore only be altered with the mutual approval of partners from across the network.

“In the case of KYC, this inherently trustworthy system eliminates the risk of the manipulation of KYC documents”, says State. “This will open up the possibility of independent KYC service providers, resulting in considerable savings for banks in Luxembourg.”

R to L: Jean Hilger, Radu State, Björn Ottersten, Serge de Cillia, Yves Maas and Catherine Bourin

Yves Maas, Chairman of ABBL, expanded on the potential benefits for Luxembourg’s financial sector, the second largest contributor to the country’s economy. “KYC regulation is only going to gain in importance, and yet it is becoming increasingly cumbersome for banks to remain compliant. From that perspective, this is an opportunity for us to collaborate on a challenge that affects us all in the same way.”

Giving the closing words at the signing ceremony on 30 May 2017, Professor Björn Ottersten, Director of SnT, emphasised the importance of such partnerships. “Bringing public and private partners together to work on challenging topics and to create intellectual property is at the heart of what we do at SnT. This work will increase Luxembourg’s competitiveness in a sector that is so important for our economy.”

The research project will take place over a three-year period and is part of the SnT’s Partnership Program, through which it develops strategic areas addressing the key challenges confronting industry and the public sector in ICT. The resulting concepts present a genuine, long-lasting competitive advantage for companies in Luxembourg and beyond.