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Payment service providers (PSPs) are to be required to provide consumers with better guidance on how to comply with know your customer (KYC) rules, Lithuania’s central bank has said.
PSPs must explain in detail to their clients why they are requesting specific information, certain documents and indicate the sources where they can be obtained, the Bank of Lithuania has said, as it continues its scrutiny of PSPs in the country.
“Good practice would be to provide the contact details of a specific responsible employee so that users can contact them directly if they have any questions,” advised the regulator, adding that when consumers are faced with the conundrum of not understanding the requirements and having no one to consult, they often avoid providing information to the financial market participant.
Such behaviour, inevitably, can result in the restriction of payment services or even the termination of business relations.
The Bank of Lithuania’s decision comes after a consultation related to the experience of payment service users.
"The consultation provided valuable information on where specifically the views of payment service providers and customers differ, leading to the most misunderstandings,” said Gediminas Šimkus, chairman of the board of the Bank of Lithuania.
Taking into account the received comments and suggestions, the supervisory authority has prepared measures to make the requests of financial institutions for customer identification information clearer and more individually adapted to users, and to make it easier and more convenient to provide it, Šimkus continued.
While placing new requirements on PSPs, the Bank of Lithuania has said that it will be issuing new guidance to improve communications between market participants and payment service users.
The central bank recommended that one way to efficiently collect and update customers' personal information could be standardised questionnaires adapted to specific groups of users, for example, students, seniors and legal entities.
In addition, the regulator suggested that the questionnaire data could be updated on the basis of the previous questionnaire, with the customer correcting or supplementing them should the need arise.
The central bank has said that it will also assess the possibilities and, if necessary, initiate legislative changes to make it easier for financial market participants to obtain the documents, data or information needed to identify a client or beneficiary directly from state information systems or registers.
Going forward, the Bank of Lithuania has said that it plans to periodically collect information from financial institutions about terminated or refused customers.
This is a step change, as currently only banks that have refused to start business relations or terminated them with payment and electronic money institutions are required to provide information.
