ABBL and its Foundation for Financial Education in cooperation with the University of Luxembourg and its Interdisciplinary Centre for Security, Reliability and Trust (SnT) launched a joint research project on the distributed ledger prototype and data analytics for KYC (Know Your Customer).

At the kick-off meeting held at the ABBL, the team of SnT researchers demonstrated a workable proof of concept for KYC on the distributed ledger fabrics of the Infrachain – Luxembourg’s market-accepted certification framework for permissioned node infrastructures. According to Dr. Radu State, Head of SEDAN Research Group, SnT: “This is only the beginning. In order to ensure a smooth transition of the PoC to its next level, we will thoroughly acknowledge major developments in the legal and technological spheres and consider adding data analytics modules as well. These are the next tasks on our agenda”.

This four-year project aims to develop and test new conceptual and technological approaches to KYC procedures in the financial services sector enabling financial institutions to use more efficient methods of customer identification.

Marc Hemmerling, General Counsel Digital Banking, FinTech & Payments, Member of the Senior Management ABBL underlines: “Recently, the ABBL in partnership with EY conducted a study in Luxembourg revealing that banks spent up to €458m on a consolidated basis in order to comply with the various regulatory evolutions, and this figure rose by 20% compared to the previous study. In this regard, any technological solution that would help to streamline compliance procedures including KYC and AML are of high importance for financial institutions”.

The topic of the project was selected by ABBL’s Digital Banking and FinTech Innovation Cluster (DBFI) from three research proposals submitted by the SnT and further approved by the ABBL and its Foundation for Financial Education taking into account the high potential of the distributed ledger technology (DLT) for KYC procedures in financial services.

“ABBL’s DBFI Cluster is becoming an impactful actor in the blockchain ecosystem of Luxembourg. By carrying out this project we not only signal the need for a deeper multilateral R&D cooperation in this area to all market actors but also contribute to making Luxembourg’s banking sector agile and technologically advanced with regard to customer onboarding” said Jean Hilger, Head of ABBL’s Digital Banking and FinTech Innovation Cluster.

At the event, Christophe Medinger, Project Leader at Banque et Caisse d’Epargne de l’Etat, Luxembourg (BCEE), shared with project participants an outline of how future KYC / AML / CFT procedures could look like from the technological and operational points of view.

Three banks volunteered to contribute to the project and test the PoC (alphabetically): Banque et Caisse d’Epargne de l’Etat, Luxembourg, BGL BNP Paribas and BNY Mellon Luxembourg.

Andrey Martovoy, FinTech Adviser, ABBL, highlights: “The ABBL established an internal Project Pilot committee that provides all necessary expertise on compliance-related and business aspects to the University of Luxembourg for the development of the DLT KYC prototype. Furthermore, ABBL’s presence in the Blockchain Technologies Taskforce of the European Banking Federation will help us to extend the outcomes of the project beyond Luxembourg”.

This project is part of SnT’s Partnership Program, which currently includes 36 collaborations with public and private organisations, addressing the major challenges facing industry and the public sector in ICT. The resulting concepts present a genuine, long-lasting competitive advantage for companies in Luxembourg and beyond.

The University of Luxembourg, through SnT, has designated Professor Björn Ottersten as the Program Director for the Project. The scientific research is performed by Robert Norvill and his colleagues within the SEDAN research group at SnT headed by Dr. Radu State, in collaboration with Dr. Zsofia Kraussl from the Luxembourg School of Finance (LSF) and Dr. Jean Hilger, Head of ABBL’s Digital Banking and FinTech Innovation Cluster.

Marc Hemmerling is mandated by the ABBL as Program Director for the Project representing both the ABBL and the ABBL Foundation for Financial Education, while Andrey Martovoy provides coordination of ABBL’s part of the project.