SEC Introduces KYC Sandbox

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On May 23, 2017, the Securities and Exchange Commission (“SEC”) of Thailand has opened a new regulatory sandbox specifically for businesses who wish to test “Know Your Client” technology. The KYC Regulatory Sandbox (the “Sandbox”) will allow interested applicants to test their KYC technology for a period of no longer than 1 year on limited group of clients under the supervision of the SEC. The SEC published a news update on their website on June 7, 2017 that stated the following: “The SEC has opened the KYC Regulatory Sandbox in order to create opportunities to utilize new technology that will increase efficiency in the KYC process and thereby lower the burden for both clients and business operators alike.”

The [KYC process is meant to allow] business operators to provide services according to the objectives and risk acceptance levels of the client. In any case, the KYC process requires time and investment and therefore presents a burden to both the client and the business operator. Furthermore, where one client requires services from multiple service providers, the KYC process becomes repetitive. Outside of Thailand, this problem has already been solved through new technology.”

In order to apply for participation in the Sandbox, an applicant must prepare the following information:

  • The type of KYC to be tested, i.e. getting to know a client, grouping clients into different categories, assessing the ability of a client to invests in securities, or the ability of the client to abide by the applicant’s rules and procedures;
  • A plan as to how the results of testing and current progress of testing will be reported to the SEC;
  • A clear exit strategy that details how the processes tested in the Sandbox will be implemented on the wider public or details regarding how to deal with clients in the case where technology tested in the Sandbox is unsuccessful;
  • The scope of testing, such as the duration of time (which cannot be over 1 year), the target group of clients and number of clients, and the amount of money that will be invested by those clients; and
  • An explanation of which specific rules or regulations present an obstacle to implementing the KYC technology.

The SEC reserves 60 days to consider applications to participate in the sandbox. Securities firms who are interested in participating should get in touch with Silk Legal so that our legal team can advise and assist with regards to the application process.


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