Banks have a legal obligation to know their customers. The Know-Your-Customer (KYC) process is carried out, among other things, in connection with becoming a customer and opening a bank account. During the process a company needs to present various certificates to the bank.
In the Real Time Economy (RTE) project we have explored the certificates and documents necessary for a company to open a bank account (see, for instance, Danske Bank and OP):
| Required information or document | Official register, if any |
| Business identity code | Trade register (Patent and registration office, PRH) |
| Authorized signatories | Trade register (PRH) |
| Beneficial owners | Trade register (PRH) |
| Financial statements | Trade register (PRH) |
| Tax residence | Tax administration |
| Information on the company owners | Shareholder register, managed by the company itself (*) |
| Description and nature of business | Managed by the company itself |
(*) The shareholder register for listed and other companies in the book-entry system is managed by Euroclear Finland.
Many of the documents are on paper or in pdf format and their delivery and management in the bank requires manual steps. This causes costs to the bank and the company and increases the lead time. There are also concerns on the integrity of the paper or pdf documents for those of foreign companies.
In the RTE project we carried out an experiment to find out if the KYC documents could be presented as electronic attestations of attributes from the company’s digital wallet to the bank. The experiment was made using synthetic data in Tax administration’s MiniSuomi test environment. In the experiment we set up a Mini-PRH that issued a business register extract and a beneficiary owners extract to the wallet of a fictive company. The company then presented the documents from its wallet to a Mini-Bank that was established in the test environment, too. The company also presented a fictive tax residence certificate issued by Tax administration in our previous experiment.
Phases of the KYC experiment:
- A company representative requests a trade register extract (EU company certificate data model) and a beneficiary owners extract (data model) from the trade register’s online service and receives them in the company’s digital wallet.
- The company representative examines the certificates in the company wallet.
- To open a bank account, the company representative presents the trade register and beneficiary owners extracts and the tax residence certificate to an online bank.
The experiment was implemented using OpenID technology and made use of the latest specifications of a legal person’s eIDAS wallet. Some steps were simplified in the experiment. For instance, in real life the company representative needs to accept the receiving and presentation of the attestations using the management interface of the wallet.
Take a look at the KYC experiment video (YouTube)
The experiment stimulated discussion on the role of the company wallet vs. the company representative’s natural person wallet in opening a bank account. We identified three alternatives:
- The company representative uses his/her own digital identity wallet (or other strong authentication means) to log in to the online bank and then enters the company wallet’s e-address to let the bank fetch the attestations. This was the approach implemented in the experiment.
- Additionally, the company issues to its representative’s wallet a mandate to open a bank account. A mandate is needed for opening a bank account at least if the representative does not have the signatory rights for the company.
- In a different approach there would be no company wallet at all. The authorities (PRH, Tax administration) would issue the certificates to the digital identity wallet of the company representative who then presents the certificates from their own wallet to the online bank. This approach would simplify the user experience but the authorities would need to issue and manage attestations describing the company in its (potentially several) representatives’ wallets.
These alternatives are studied in the RTE project and in the EC funded EUDI Wallet Consortium (EWC) Larce Scale Pilot in which Tax Administration, Digital and Population Data Services Agency, Patent and Registration Office and State Treasury participate from Finland. Our experiment has drawn attention among the pilot participants, and we are looking forward to being able to continue the experiment opening a bank account also in a foreign online bank and vice versa.