State Duma approves draft law on Know Your Customer platform in second reading
The Bank of Russia is developing the information platform Know Your Customer. It will enable credit institutions to obtain information on the risk of getting involved in dubious transactions of clients and their counterparties. The launch of this platform will reduce regulatory burden on bona fide entrepreneurs — bank clients. Furthermore, credit institutions will be able to focus on countering dubious transactions.
Having a long-term experience of detecting and qualifying dubious transactions and employing much more powerful information resources than any other banks, the Bank of Russia will group bank clients (legal entities and individual entrepreneurs) by risk level (high, medium, and low) and communicate relevant information to credit institutions on a daily basis.
The use of information provided by the Bank of Russia is voluntary. Credit institutions will make final decisions on a client’s risk level at their own discretion.
Nonetheless, transactions for low risk clients should be carried out seamlessly, and banks will not be allowed to reject them (this creates an environment of safe customers). If a credit institution and the Bank of Russia assign a high risk level to a client, all transactions of the latter will be prohibited. Generally, such entities do not carry out business and are created solely to conduct dubious transactions. According to the Bank of Russia’s preliminary assessment, approximately 99% of credit institutions’ clients have a low risk level, and 0.7% — a high risk level.
In case of restrictions, clients will have the right to challenge them in the Interagency Commission under the Bank of Russia. Clients’ complaints will be considered with the engagement of business associations’ representatives.
The Know Your Customer platform is planned to be fully commissioned on 1 July 2022.