09, 2021 06:29 PM / by NIBSS/ Header Image Credit: FTA
The approved standard operating guidelines is dated March 29, 2021
The Deposit Money Banks (DMBs) presently adopt various methods for Know Your Customer (KYC) requirements. The methods used in identifying customers differ from Bank to Bank because there is no harmonized way of verifying customer's identity.
In view of this, the financial services sector through the Bankers' Committee proactively embarked upon the deployment of a centralized Bank Verification system for the banking industry. This is to aid the delivery of its services by building a technology system for verification and secure authentication of the identity of bank customers.
This system will have the ability to identify a person by a physical characteristic such as fingerprints, facial, voice or retinal scans. This has had several applications in security and has been used by several organizations. It has become popular because of its many advantages over traditional security systems such as passwords and Personal Identification Numbers (PIN). The selected identification option for the Nigeria Bank Customer Identification Scheme is fingerprints and facial recognition.
The Central Bank of Nigeria (CBN) in conjunction with the Bankers' Committee embarked on a shared services program with three key objectives. These are to
I. Improve KYC Process within the Banking Sector
II. Increase access, convenience, service levels across the industry
III. Enable greater financial inclusion and integration of financial services into the economy, with its attendant positive impact on economic development
The Bankers' Committee with CBN recognized that payments is a key driver of costs, hence the committee's focus on payment system transformation. A major requirement that affects the Nigerian payment system is the need to "Know Your Customer". Additionally, the need to know your customer is reinforced by the latest Anti-Money Laundering/ Counter-Terrorism directive and requirements.
Uniquely identifying bank customers would help immensely to reduce the current administrative costs of the KYC requirement. This is in addition to the revision of the KYC requirement. More importantly, as the regulators (CBN and others) are focused on transforming the payment system (policy and its processes), a unique identity for customers would impact other areas such as credit check, authenticity and nonrepudiation of transactions and fraud management creating more efficiency and effectiveness within the payment system. In view of this, the financial services sector through the Bankers' Committee and the CBN proactively embarked upon the deployment of a centralized Bank Verification system for the banking industry.
However, to undergird the centralized Bank Verification system there is need for a uniform repeatable approach in using the system in the banking industry. This uniform approach needs to define the routine processes and procedures followed by every organization in the industry that would facilitate consistent conformance to technical and quality system requirements and support data quality. A Standard Operating Procedure for the BVN system would be specific to the banking industry and assist the industry to maintain their quality control and quality assurance processes and ensure compliance with governmental and nongovernmental regulations. This document is developed by the Bankers' Committee Operations committee for the project. The Operations Committee is commissioned to champion the development of BVN standards for the banking community.
2.0 Purpose and Applicability
The purpose of these standard operating guidelines (SOG) is to prescribe the processes for collecting, updating, linking, storing and using identification data from bank customers. This SOG takes into consideration the regulatory requirements as well as established standards and industry best practices. In particular, this SOG describes the operationalization of the approved Regulatory Framework for BVN Operations and Watch-List for the Nigerian Banking Industry (October 18, 2017).
This SOG shall apply to all users of BVN
The BVN Matching System will aid in uniquely identifying customers across all banks. This solution will also help in reducing repudiation of transactions. Verification of identity is possible without resort to documents that may be stolen, lost or altered. Other benefits include:
A person's fingerprint cannot be shared easily or stolen and no two persons can have an exact match.
Biometrics is easy to use and does not have associated stress of forgotten password/password resets and can never be forgotten as they are physical characteristics of the person.
A biometric feature unequivocally attaches a person to an event. If there is a fraudulent/suspicious transaction, regulatory authorities and banks would have an accurate record of the customer involved.
This system will help to increase deterrent controls on financial transactions and reduce/mitigate fraud risk.
3.0 Overview of the BVN Operations process
The BVN operations process will involve the following:
Enrolment: Enrolment is the process where individuals have their biometric and demographic data captured into the BVN central database and a unique ID, the Bank Verification Number (BVN), generated for the customer. This will bring a lot of value to the banking system in Nigeria, especially in the area of Know Your Customer (KYC).
Identification: By Identification, it means the comparison of a person's biometrics against biometrics of all enrolled customers to see if the person is already enrolled or not before issuing the BVN.
Validation: This refers to the process of confirming/validating the demographic information of a BVN holder by searching for the BVN using the BVN Validation portal. Upon successful validation, the image and demographic information of the customer is displayed.
Verification: This refers to the process of verifying the customer by matching his/her biometric template with what has been captured in the database. By Verification, it means 1:1 comparison of person's biometrics against biometrics of an enrolled customer with the same BVN to see if the biometrics is a match. This, therefore, enables the bank to uniquely identify the customer and also meets the minimum KYC requirement.
Linking customer's unique ID to all related bank accounts: This is a process of using the customer's unique ID generated after his/her enrolment to link all his/her bank accounts irrespective of which bank the account is domiciled. This ensures that the customer would not be able to enroll twice and that the customer's activities in other banks (especially suspicious ones) can be easily made available to other banks where the customer has an account(s).
Offline Authentication: Offline verification will use fingerprints presented on card readers with offline capabilities to authenticate the customer by comparing the fingerprint or the facial geometry with the data stored on the e-identity card.
Fraud Management: This is a process aimed at using a traceable Unique Customer Identity to deter, prevent, detect and mitigate the risks of financial fraud in the industry.
Customer information update: This is the process by which the customer updates his/her information on the central identity database.
Credit Check: This process involves evaluating an applicant's loan request in order to determine that the borrower will fulfil his/her obligation. Approved Credit Rating Guidelines require Banks to render regular information to the credit bureaus, including information of all credits advanced to customers, defaults by customers and other credit related information.
BVN Operating Model
The diagram below (figure 1.0) describes the BVN Operating Model