The Bangko Sentral ng Pilipinas (BSP) is proposing that all banks and financial institutions under its supervision integrate the National ID Authentication Services (NIDAS) into their customer due diligence (CDD) protocols, according to a draft memorandum issued by the central bank.

Under the proposed rules, BSP-supervised institutions (BSIs) would be required to use the Philippine Statistics Authority's (PSA) NIDAS platform for client verification, a move the regulator says will strengthen know-your-customer (KYC) processes while advancing broader adoption of the country's national identification system.

"NIDAS integration is a necessary regulatory measure to support the broader use and adoption of the National ID as the country's foundational identity system," the BSP said in a statement. "NIDAS enables BSIs to leverage the National ID for more accurate, secure, and efficient customer identification and verification, strengthening know-your-customer processes."

NIDAS is a digital verification system co-developed by the PSA and the Department of Information and Communications Technology. It enables government agencies and private enterprises to authenticate an individual's identity in real time through biometric checks and database matching against the National ID system, which was established under Republic Act 11055, the Philippine Identification System Act, signed into law in 2018.

Under the proposed framework, BSIs must use NIDAS through National ID eVerify for digital and in-person customer onboarding, account opening, and account updating. Institutions that have not yet completed their NIDAS onboarding are expected to use the National ID Check platform to verify clients' National IDs in the interim.

The central bank emphasized that NIDAS integration will not replace existing flexibility in identity verification. "Integration with the NIDAS shall not preclude the application of a risk-based approach in the use of other valid identification documents (ID) and identity verification methods, particularly where no National ID is presented and/or NIDAS is unavailable," the BSP said.

BSIs will also be required to select the appropriate NIDAS authentication tier based on the risk profile of the customer, product, service, or transaction. The Philippine Identification System defines three tiers. Tier 1 involves basic online authentication using "yes/no" responses and back-end PhilSys number (PSN) token verification. Tier 2 provides e-KYC services with pre-agreed demographic data fields between the relying party and the PSA. Tier 3, which is not yet operational, would allow lawful interoperability by matching back-end PSN tokens across relying parties.

The BSP clarified that when CDD is conducted through NIDAS, the generated authentication confirmation will satisfy ID submission requirements for first-time customers, replacing the need for a physical or printed National ID.

Throughout implementation, BSIs must maintain robust anti-money laundering controls, counter-terrorism and proliferation financing measures, cybersecurity protocols, and data protection standards. The proposal aligns with the Philippines' broader efforts to reinforce its AML/CFT framework following the country's removal from the Financial Action Task Force's increased monitoring list in February 2023.

The adoption will proceed in two phases. Phase one begins three months after the memorandum's issuance and covers universal and commercial banks with retail banking services, digital banks, electronic money issuers, and virtual asset service providers. Phase two takes effect six months following the issuance's effectivity and encompasses all remaining universal and commercial banks, thrift banks, rural and cooperative banks, operators of payment systems with KYC or know-your-merchant functions, and other BSIs.

A BSI will be considered compliant once it submits a complete application form with all documentary and regulatory onboarding requirements to the PSA.

"Through this initiative, the BSP aims to advance the secure and broader adoption of the National ID across the financial sector while supporting financial inclusion, digitalization, and financial integrity objectives," the central bank said.

According to PSA data, 90.29 million Filipinos — representing 80% of the country's population — had been registered in the National ID system as of end-October last year.

— Katherine K. Chan