Customer Due Diligence – Turning the tables on fraud

Customer due diligence (CDD) refers to the requirements that banks and other financial institutions must adhere to when they’re doing business with you. Specifically, they have to collect and document information that confirms you are who you claim to be and that the transactions to your account are made by you. What's in it  for you and how can you help?

How is my information used?

When you open a new account with a financial institution, you’ll be asked to provide your name, birthdate, address, phone number and your tax identification number. You’ll be asked about the types of transactions you will be conducting. For instance: Will there be any international wires to or from your accounts?  Will there be direct deposits from your employer?  What type of work do you and your spouse perform?  What funds will you use to open the new account?

The list of questions may go on, and by then you’ll likely have a question yourself …”What does all this information sharing do for me?”

Although customer due diligence processes may seem annoying or invasive, they aren’t meant as a punishment to you - or the poor service agent whose job it is to collect your information. In fact, the processes are meant to protect you.

The May 2013 issue of the SAR Activity Review – By the Numbers, published by the Financial Crimes Enforcement Network (FinCEN), reported some significant trends for 2012:

  • Identity theft had risen more than 163%.
  • Computer intrusion was up 63%.
  • Wire fraud had increased by 34%.
  • Credit and debit card fraud was up 27%.

Although these numbers are for the US, the trends are global. That’s why regulations such as these are being implemented around the globe. And those regulations are turning the tables on the criminal element - protecting against identity theft, fraud, the laundering of illegal funds and, ultimately, terrorist financing.

Your personal information and account activities create a unique signature for you – a virtual signature. Financial institutions collect your information to ensure that it is just as difficult for fraudsters to forge your virtual signature as it is to forge your handwritten one. By knowing what your normal transaction types and account activities are, institutions can see deviations and possibly prevent fraud before it happens.

This isn’t easy. In fact, there’s a science to it - analytics.

What’s new?

For years, SAS has been helping institutions use advanced analytics to meet their CDD requirements. Using those learnings, SAS has now designed a software solution specific to CDD.  The solution also addresses the Foreign Account Tax Compliance Act (FATCA) and performs customer risk ratings on the entire customer base, not just partial segments of high-risk clients.

But, the new software is only part of the solution – you can work with your financial institution to turn the tables on fraudsters.   It’s your information and your understanding of who you truly are that impacts the criminal element.  No one can know you as well as yourself, but rest assured that there are people out there who will give it a try so that they can carry out their nefarious plans. Working together to protect your information - and using the power of analytics to know faster, know more and, more importantly, know now - puts us ahead of the criminal element to prevent the fraud, the theft, the terrorist threat before it even occurs.

Read more about customer due diligence. 

tags: Bank Secrecy Act, CDD, Customer Due Diligence, Enhanced Due Diligence, FATCA, USA PATRIOT Act

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