KYC: Know Your Customer
Bacs Direct Debit Scheme Rules state that a Service User who wants to collect Paperless Direct Debits must verify the identity of the payer and his/her address, prior to the origination of any Direct Debit collections. Bacs recommended that this payer check is achieved by using historical data from company records about existing customers, or for new customers by using a selection of registers e.g. electoral roll, post code list or credit rating list, which are available from Local Councils, the Royal Mail or other suppliers.
A list of verification measures to assist in verifying the payer’s details is available from:
In addition to the ID checks listed by Bacs there are many others that are not listed, which should be capable of giving an appropriate ID Check. If you do a web search on ID checking, or KYC checking, you should find a few more.
The purpose of carrying out this ID check is to prevent fraudulent transactions being set up to obtain goods and services using someone else’s identity and bank details. Whilst the risk to the general public is very low, thanks to the Direct Debit Guarantee, the risk of fraud is entirely with the Service User.
At the time of writing, Direct Debit is still relatively low risk, and most other payment methods carry a considerably higher risk of fraud, however, all payment fraud is on the increase and an appropriate level of KYC check is an important step in protecting your organisation.
What constitutes an acceptable level of KYC checking?
This is a difficult question to answer and ultimately it will be up to you and your sponsoring bank to agree what is the right level of checking for you. If your organisation sells high value goods such as mobile phones or is involved in financial services then you would be expected to have a thorough process in place. If you are a charity or not for profit organisation, then the level of risk to you is considerably lower. Regardless of whether you believe you are likely to be a target of fraud you still must have some level of check in place if you collect via the Paperless Direct Debit scheme and it is highly recommended for AUDDIS users.
For more information about KYC, please contact us.