customer due diligence solutions

The global financial landscape has changed a lot over the past decade. Gone are the days when financial institutions were simply unable to collect information on their customers. Now, financial institutions run background checks to know their customers via know your customer (KYC) policies. Financial institutions are also focusing more on customer due diligence due to growing concern about money laundering activity. They look to customer due diligence solutions, as they collect customer details from different sources. While collecting customer information, they also need to adhere to data protection rules.

Understanding customer due diligence

Customer due diligence (CDD) is the process of collecting customer details. Financial institutions use CDD before extending any banking/finance service. Customer information is collected for various financial services. For example, a customer may have to provide personal details before using a fintech application or using mobile banking services.

Customer details help financial institutions analyse associated risks. For example, someone may try using a fintech mobile application in another’s name. How could the financial institution identity fraud without collecting customer details?

Financial institutions have no choice when it comes to CDD. With the launch of KYC rules, it is mandatory that every financial institution conduct CDD. By gaining insight on customer details, financial institutions can reduce the chances of fraud. Malicious actors would also not be able to misuse online banking services when banks have all customer details.

KYC rules give banks the right to conduct CDD. However, laws also require banks to protect the sensitive data provided by customers, as banks would be held responsible in the event this data leaks. The authorities concerned may impose fines or cancel a bank’s registration, damaging its reputation.

Complying with data protection copy laws

When financial institutions collect customer information, they usually have to save it in their databases. They may also need to copy customer data from one device to another. For example, different bank departments may need customer data to analyse associated risks. The law requires that data integrity be maintained during transfer.

In addition, financial institutions cannot share customer data with an organisation/individual that does not have the required licence and clearance to view such data.

CDD solutions need to be secured first. For example, a financial institution provides a fintech mobile app to customers, and customers enter their details on the app before using it. However, in the event the app is not secured, malicious actors could intercept the data. For the same reason, financial institutions should pay extra attention to securing digital channels responsible for CDD. Gone are the days when customer data was collected manually on paper sheets.

How to ensure CDD with data protection

Data protection is a hassle for financial institutions around the world. A single data leak would damage their reputation. The best way to ensure data protection while conducting CDD is to look for external support. A reliable research firm could help financial institutions implement secure CDD solutions, from media screening to investigating alerts. A bank could also reduce in-house costs for KYC practices.

By Junaid Awan

Junaid Awan is a well-known name in the blogging and SEO industry. He is known for his extensive knowledge and expertise in the field, and has helped numerous businesses and individuals to improve their online visibility and traffic. He writes on business, technology, finance, marketing, and cryptocurrency related trends. He is passionate about sharing his knowledge and helping others to grow their online businesses.

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