Several financial organisations such as banks, insurance companies, lenders, and other relevant industries all across the world need to know their customers and identify who they’re doing business with. Therefore, these sectors need to implement customer identification program to know about the identity of their customers and verify their authentication. In this KYC AML guide, you will learn about the entire process of a customer identification program, CIP requirements for banks and other financial industries, and how it is useful to numerous businesses.
What is a Customer Identification Program?
Customer Identification Program or CIP is the process of verifying the identity of a user whom you’re establishing and partnering your business with. The purpose of CIP verification is to make sure that the client you are working with is genuinely the one they are claiming to be. The customer identification procedure is one of the most significant means of verifying the identity of a customer and determining the events of financial crimes such as money laundering, identity theft, and other fraud.
Well, the CIP requirement for existing customers or new ones usually needs some critical pieces of information. This data includes some basic information about the customer, such as name, date of birth, home address, and government-issued ID number. Once this data is collected, the company verifies it with a number of sources to determine if the information matches. Anyhow, let’s dig into the whole process to know how CIP works.
How is the Customer Identification Program Done?
Financial institutions must adhere to and keep the necessary customer identification processes to validate the customer’s identification in order to comply with KYC and AML standards. However, it is mandatory that financial institutions, insurance industries, and other economic sectors carry out appropriate and thorough customer identification procedures as per the company’s size and sector.
For an effective onboarding process, customers must be identified and their identity must be verified in five easy steps according to the CIP protocols for banks and other financial institutions. The CIP process involves five steps:
User Information Collection
The client must submit their name, address, date of birth, and taxpayer identification number. In addition, the user must upload an image and ID card number that was issued by the government as identification.
Information Verification
The bank or other financial institution verifies the customer data after it has been gathered in order to confirm the user’s identification. However, in electronic KYC or digital sites, the client identification is confirmed via video interaction or by cross-checking the submitted documentation with the information stored in the database.
Risk Evaluation
Based on the consumer’s industry, geography, previous transactions, and other attributes, the organisation must evaluate the risk associated with that user. The firm utilises this data to decide whether they need to perform enhanced due diligence on the customer. Clients that represent a greater danger, such as those engaged in heavy transactions or residing in high-risk regions, need to be scrutinised more closely.
Data Record
Financial institutions keep track of user information after it has been collected and confirmed for a minimum of five years after the consumer cancelled his account or used any other service. The account is permanently terminated or suspended after five years.
Continuous Monitoring
To guarantee the integrity of customer records, the organisation must frequently check customer data and keep an eye out for any unusual activity involving client transactions. According to regulatory standards, the business must have a system in place to identify and alert the appropriate authorities to any questionable activity. Besides, the organisation is required to update customer data as necessary.
Conclusion
The customer identification program is explicitly designed to verify user identification before onboarding them and prevent businesses from financial crimes such as money laundering and terrorism activities. This process involves several steps such as gathering and verifying user information, risk monitoring, data recording, and ongoing evaluation of customer’s activities. CIP is one of the important processes for businesses to comply with all regulatory requirements and ensure institutional prevention.
