Bacs, Bureau Service, Direct Debit, Paperless Direct Debit (PDD), Security, Training
08, APR 2016

Do you know your customer?

Direct Debit fraud … really? Yes, it is possible. While Direct Debit fraud is much rarer than, for example, credit card fraud, it does exist and, for those who collect Direct Debits (Service Users), reducing risk in collections is paramount. A major element in this is what is often referred to as “KYC”.

What is KYC?

KYC stands for “Know Your Customer”. KYC checks are part of a broader set of banking regulation used to verify the identity of clients and reduce risk. In terms of preventing Direct Debit fraud, KYC is simplified to mean the verification of an individual Payer – that they are who they say they are and live where they say they live – prior to making a Direct Debit collection.

The checks are recommended for AUDDIS, where a paper Direct Debit Instruction (DDI, or DD mandate) is submitted electronically to the bank of the Payer, and are mandatory for Paperless Direct Debits, i.e. where there is no paper DDI because sign-up was online or over the phone.

Paperless Direct Debit Service Users are required to:

  • Adhere to Direct Debit Scheme rules on paperless sign-ups
  • Check each paperless sign-up (whether over the phone or electronic)
  • Check Direct Debit details at the point of capture
  • Not rekey Payer’s details
  • Confirm the Paperless Direct Debit set-up to the Payer/customer within
  • 3 days of sign-up*

*An alternative time frame can be used when combining Confirmation of a Paperless Direct Debit set-up and Advance Notice of a collection to the Payer.

Know Your Customer processes needn’t be scary!

Know Your Customer requirements don’t need to be overly onerous and your KYC process shouldn’t discourage Direct Debit sign up – it should support it! Some customers may have concerns about providing their bank details and other personal information electronically or over the phone and so may prefer a paper DDI. Service Users should maintain this as an option.

Payers’ concerns can include:

  • The security of their information
  • The possibility of mistakes
  • The possibility of Direct Debit fraud

Service Users who stay up-to-date with the latest Direct Debit Scheme rules, and are aware of the mandatory requirements for such checks, can handle concerns more confidently. This helps to promote Paperless Direct Debit sign-up as a method that has many benefits for both the Payer and the Service User. See Clear Direct Debit Scheme Training to learn more about how we help organisations in understanding the scheme rules and operating an efficient, compliant Direct Debit process.

Bacs have provided a list of recommended verification measures, which include:

  • Address verification against Royal Mail Postcode Address File (PAF)
  • Telephone number verification
  • National change of address processing
  • Gone away suppression files
  • Electoral roll processing
  • Sight of documentation or card (a bill, statement, debit/credit card, cheque book)

For more suggestions, see (log-in required).

Learn more about our Clear Direct Debits Bureau Service.

If you need help now with regard to Direct Debit fraud or understanding Know Your Customer requirements for Direct Debit Service Users, don’t hesitate to contact us today.