It is imperative for companies across a range of industries, particularly in the finance sector, to know who they are doing business with. Know Your Customer (KYC) checks are a critical part of this process, and include a range of customer due diligence (CDD) measures to ensure organisations can verify who a customer is and their potential risk to the business.
In cases of increased risk, such as higher risk of money laundering and terrorist financing, enhanced due diligence (EDD), also known as enhanced customer due diligence (ECDD), is required.
In a nutshell, EDD helps companies stay safe from potentially dangerous people and businesses.
What is required by Australian Transaction Reports and Analysis Centre (AUSTRAC)
According to AUSTRAC, EDD measures must be applied in the following cases
- there is a high risk of money laundering or terrorism
- a customer is (or has a beneficial owner who is) a foreign politically exposed person (PEP)
- a customer’s suspicious activity or behaviour may lead to making a suspicious matter report (SMR)
- a transaction involves a person or a company that has a presence or is incorporated in a prescribed foreign country
The Australian government financial intelligence agency dictates that an EDD program must also
- define the types of customers, designated services, channels and jurisdictions that you consider to be high or greater level of risk, and ensure procedures allow for consistent implementation of ECDD processes
- specifically identify who is responsible for carrying out ECDD
- establish controls for consistently applying ECDD to ensure its operation, monitoring and internal reporting
This series of measurements and requirements allows businesses to get a deeper understanding of who they are interacting with, measure the level of risk they present to the business and other organisations, and mandate reporting measures to ensure risks are documented for future reference.
How do customers benefit from EDD?
Any business that takes a vigilant approach to ensuring compliance and following industry regulations is taking proactive measures to be more reliable, financially sustainable and secure.
By verifying each party and the various aspects of their risk in advance of doing business with them, organisations can plan ahead and even stop transacting with these high-risk entities to protect their customers.
A related challenge to conducting EDD effectively is delivering on customer experience. While various measures and checks are taking place, it is important for organisations to create minimal extra ‘work’ for customers as they are signing up for a digital service. Frictionless customer experiences are priceless in today’s increasingly competitive business landscape. Businesses that take a combined view to delivering customer experience alongside effective EDD measures will ensure long-term customer loyalty, as well as meet compliance requirements.
GBG products that can help you with KYC
Our Identity Solution can help you to stay on top of your regulatory requirements wherever you operate and give you a competitive edge as a leader in compliance.