Customer Due Diligence: Its Importance for Business and 4 Ways to Implement It
Customer Due Diligence: Its Importance for Businesses and 4 Implementation Methods
Have you ever undergone an intensive interview with a bank for loan purposes? It doesn't always have to be for a loan; it could also be for investment purposes in a business. Even if you haven't, you may have plans for such matters in the coming years. Prior to that, both prospective clients and lenders must fully understand the Customer Due Diligence (CDD) process before executing such transactions.
Customer Due Diligence is a procedure that Financial Service Providers (FSPs) must conduct on prospective clients and/or clients. FSPs in this context can take various forms, but the most commonly encountered is banks. The CDD procedure is carried out in the form of identification, verification, and direct monitoring. This is done with the aim of preventing money laundering and terrorism financing efforts. Therefore, this activity is indeed mandated by the government through Bank Indonesia Regulation Number 14/27/PBI/2012. Let's delve into the details of the benefits of CDD and its implementation.
Benefits of Customer Due Diligence
- Building Good Relationships with Prospective Clients
The saying "to know is to love" seems to encapsulate this. Getting to know prospective clients better will help companies understand them. In addition to meeting their needs, companies can also initiate good relationships with them. Thus, a familial approach will be highly needed in this regard. - Preventing Fund Misappropriation
Some types of financial transactions involving large sums of money require proper supervision. Regarding large sums of money, the government through the Financial Services Authority (OJK) has stipulated that transactions worth a minimum of Rp. 100 million need greater oversight. In line with the aforementioned regulation, the government wants all forms of FSPs to support anti-money laundering and terrorism financing prevention programs in Indonesia. - Ensuring Doubtful Information
When doubtful information is found, companies must immediately check directly with prospective clients. Especially if the information indicates misuse of existing funds. Not only prospective clients and/or clients, but companies are also allowed to request information verification from attorneys and beneficial owners.
Implementation of Customer Due Diligence on Prospective Clients or Clients
For the implementation of CDD itself, companies, in this case, FSPs, need to conduct face-to-face meetings. Although it may not be possible to be done in the same place, this process must be carried out directly with prospective clients or clients, not by proxy. The system can be in the form of filling out forms independently or through intensive interviews. Some minimum things that need to be asked are as follows:
Complete Personal Identity
The personal identity required in the CDD process will be very detailed. Starting from the personal data of the concerned client, to the job data they have. In addition to basic personal data such as name and identity number, companies also need to request specific information. Some of the specific information requested includes aliases (if any), addresses other than those listed in identity documents such as ID cards, marital status, and so on.
Don't forget to request the relevant identity documents. It can be an ID card, driver's license, passport, or tax identification number (NPWP). The next thing they should provide is specimens or samples of their signature.
It is highly recommended for companies to implement two-factor authentication. So, in addition to the detailed information above, companies also need to record their biometric information. For example, fingerprints, facial prints, and so on. This is to ensure data accuracy when matched later.
Beneficial Owner Identity
In OJK Regulation Number 23/POJK.01/2019, a beneficial owner is a person who receives benefits from the client's account. Other criteria are as follows:
- Ultimately own the account
- Control client transactions
- Authorize transactions
- Control corporations or other legal arrangements
- Ultimate controller of transactions conducted through legal entities or agreements
Data related to the beneficial owner's identity is almost the same as personal identity, albeit not as in-depth.
Source of Funds and Income
The source of funds and average annual income also needs to be requested by the company. Not only the amount of the funds but also the origin of the income. Whether the income comes from primary employment, side jobs, businesses, or parental gifts.
Purpose of Fund Usage
The purpose of fund usage or the transaction to be carried out also needs to be clear. Prospective clients or clients need to describe the purpose of the transaction. It can be a story from the recipient or from the client themselves.
By understanding Customer Due Diligence, you as a prospective client or client, no longer need to worry when the bank conducts in-depth face-to-face conversations. If necessary, the beneficial owner also receives a brief explanation of CDD to avoid misunderstandings. Every form of CDD procedure is done for the benefit of all parties. Whether it's FSPs, clients, or prospective clients.
Because in any case, risks in the financial sector must be managed well to prevent undesirable occurrences. Brick is one party that will help make customer identification and verification processes more effective and efficient. Using Brick means you can expedite the CDD process without compromising security. This is because of features like Employment Data and Transaction Data. Starting from identity numbers like ID cards, tax identification numbers (NPWP), BPJS, to complete addresses. Even the amount of salary earned by clients each month can also be quickly identified through Brick's Employment Data.
