The opening of a bank account has been one of the top hurdles faced by foreign investors intending to set up a business in Dubai & UAE free zones. The strict Anti Money Laundering (AML) regulations have made Know Your Customer (KYC) and due diligence requirements stricter for the opening of the bank account by new startups and freelancers in Dubai.
The tough procedure of opening a business bank account has delayed company operations in Dubai for many startups and freelancers who finds advantages offered by free zones and DED such as instant license and cost-effective packages are not effective.
However, the new ‘KYC Blockchain Consortium’ launched by the Dubai Department of Economic Development (DED) is offering an ‘Instant Bank Account’ opening facility which will bridge the gap between banks and free zones and DED and ease the process of the opening of the bank account in Dubai.
What is the KYC Blockchain Consortium?
The KYC Consortium is a Blockchain-powered consortium launched by the DED to make the process of bank account opening less cumbersome for freelancers & newly registered companies in Dubai. For this consortium, the DED Dubai has joined hands with 6 UAE banks-Emirates NBD, Emirates Islamic, HSBC, RAK Bank, Abu Dhabi Commercial Bank and Commercial Bank of Dubai.
The KYC Consortium is a technologically advanced blockchain platform that enables the sharing of verified KYC data between banks and licensing authorities in the UAE. It will facilitate a faster, more secure exchange of digital customer data and documents through advanced blockchain-powered technologies, which is a first of its kind initiative in the UAE.
According to the information on the DED Dubai website, the blockchain consortium will start operating in the first quarter of 2020, where more financial institutions and licensing authorities are expected to participate in it. With that, both the existing and future participants of the consortium will come together on a single platform and drive the mutualisation of KYC efforts.
What is Blockchain Technology?
Blockchain is one of the latest technologies that is shaping the future of the world especially businesses. In simple words, it can be defined as a chain of records of data managed by a cluster of computers not owned by any single entity. Each of these blocks of data is secured and bound to each other.
UAE Blockchain Strategy 2021
In April 2018, UAE came up with a dedicated strategy known as Emirates Blockchain Strategy 2021. In line with the region’s efforts to shape a future-ready economy, it aims to capitalise on the blockchain technology to transform 50 per cent of government transactions into the blockchain platform by 2021. The Dubai Blockchain Strategy has been developed by a collaborative effort by the Smart Dubai Office and the Dubai Future Foundation. The primary goal of this initiative is to continually explore and evaluate the latest technology innovations that provide us with an opportunity to deliver more seamless, safe, efficient, and impactful city experiences.
How the Consortium Will Ease the Banking Process for Businesses in the UAE?
To date, the banks in the UAE have been under huge compliance pressure. They have been very stringent with the KYC and due diligence as they are required to adhere to tough regulations in a bid to prevent crimes like money laundering and financing of terrorism. The instant bank account facility is one of the biggest benefits that the Consortium offers. The facility will prove to be a boon for newly set up businesses in Dubai, big or small.
The KYC Blockchain platform will ensure that authentically verified KYC data of companies will simultaneously be shared with financial institutions of their preference. This will expedite the process of bank account opening for newly registered companies. This will cut the cumbersome and expensive requirements KYC data management for already registered companies in Dubai.
The new initiative starkly deviates from the existing methods in which numerous paper-based KYC files are excessively originated and managed in silos. The new initiative will optimize costs by allowing the banking institutions to give up the outdated methods of identity verification and take full advantage of the latest blockchain technology that offers a much faster, easier, safer and more efficient way of verification process than the traditional methods.
The KYC Consortium effectively eliminates the outdated system of regulated data silos, resulting in better compliance oversight and customer service. The blockchain KYC Consortium will create a unified ecosystem for data sharing and create a global standard for the sharing of KYC data. With the launch of the new blockchain KYC Production Platform and the instant bank account facility, entrepreneurs who seek to form their companies in Dubai can enjoy the benefits of seamless registration and account opening and improved KYC capabilities.