KYC / Know Your Customer Responsibilities

KYC stands for Know Your Customer. It is the process of identifying and verifying the personal and financial information of customers. It is a mandatory requirement for Service Users collecting Direct Debit Instructions via a Paperless methodology such as over the internet, face-to-face or via telephone. For organisations collecting Direct Debit Instructions on paper, it is “strongly recommended”.

KYC checks can help ensure organisations know who they are dealing with and can identify potentially fraudulent or suspicious activity. These checks protect both the payer and the collecting organisation. They are intended to minimise risk, ensure that Direct Debits are established with legitimate individuals and businesses, and ensure that customer information is accurate and reliable.

What Are the KYC Requirements?

For new Direct Debit Customers:

The Service Users Guide and Rules to the Direct Debit Scheme states:

“Prior to the origination of any Direct Debits the service user must verify:

• The identity of the payer
• Their address
• Their account details – ensuring that the details provided relate to the payer.”

For existing Direct Debit Customers:

The rules state: “Validation and verification must also be undertaken when an existing customer contacts the service user directly to provide alternative account details“.

How Should a Service User perform KYC Checks?

There is no single KYC approach. Service Users should consider their business, their customers and their processes and decide what approach would be possible for them to undertake. This approach should then be approved by the sponsoring bank prior to implementation. To help organisations decide upon a suitable approach, Pay.UK (Bacs) do produce a list of POSSIBLE verification measures that could be used. These could include:

1. Requesting to see customer documentation

The Service User can request documentation from the consumer to help achieve their KYC requirements. Documentation could take the form of passports, driving licences, utility bills etc.

2. Interaction with the customer

It is possible to undertake KYC verification checks without requesting documentation from the payer. Instead, the Service User could ask the payer questions that only the payer would know e.g. membership number, recent transactions on their account etc.

3. Third Party Sources

There are third party organisations who provide information that can be purchased to help with KYC checks. These sources include the PAF file (Postcode Address Finder file), the Electoral Roll and other services such as ‘Payer Name Verification’ or PNV.

Payer Name Verification’ or PNV

When collecting payments from your customers, data accuracy is critical. A single typo or fraudulent sign-up can lead to failed collections, costly administrative overheads, and unpaid invoices.

To help you secure your Direct Debits and improve scheme compliance, Movimo have introduced Payer Name Verification as part of our comprehensive Direct Debit bureau service. Payer Name Verification (PNV) is a security and validation check to ensure that the details your payer provides when setting up a Direct Debit, matches the name registered on their bank account. It acts like “Confirmation of Payee” (which checks the name on a bank account when you are paying). Payer Name Verification works in reverse to verify the person paying you.

Ongoing Monitoring

KYC is not a one-off exercise. Service Users should have a process to undertake some form of KYC checks when a customer contacts them – especially if the customer is asking for a refund or wishing to change bank details. These KYC Checks are something we all experience on a regular basis when we contact organisations. It may be that we are asked about our Membership number, recent transactions on our account or personal details such as a maiden name etc.

Common Risks for Direct Debit Service Users

Without effective KYC Checks, organisations may face:

• Fraudulent Direct Debit Instructions.
• Increased Indemnity Claims.
• Financial losses.
• Reputational damage.
• Increased scrutiny from sponsoring banks.

Strong KYC Checks significantly reduce these risks and help maintain confidence in Direct Debit as a payment method.

Conclusion

For organisations collecting payments through the Bacs Direct Debit scheme, KYC is an essential part of responsible payment collection and risk management. All Service Users should be able to demonstrate that they understand who their customers are and that they have taken reasonable steps to verify customer identities.

By implementing robust KYC procedures, Direct Debit Service Users can reduce fraud, minimise indemnity claims, satisfy sponsoring bank expectations, and protect both their organisation and their customers. Ultimately, effective KYC is not simply about compliance – it is about maintaining trust

If you have questions, remember – we are here to help. Contact us!