Customer Due Diligence (CDD)
CDD entails collecting identifying information to verify a customer’s identity and more accurately assess the level of criminal risk they present.
CDD is a foundation of the Know Your Customer (KYC) process, which requires companies to understand who their customers are, their financial behavior, and what kind of money laundering or terrorism financing risk they present.
At a basic level, CDD requires firms to collect a customer’s name and address, their business affiliations and details of such businesses, and their intended use of their account. Firms should not just take customer’s words for it! It is important to verify customer’s information with reference to official documents such as driving licenses, passports, utility bills, and incorporation documents. Such official documents should be further verified with the issuing authority.
Customer Due Diligence involves the following basic regulatory obligations:
- Customer Identification:Companies must identify their customers by obtaining personal information and data, including name, photographic ID, address, and birth certification, from a reliable, independent source.
- Beneficial Ownership:When a company or third-party is acting on behalf of someone else, companies should seek to establish ultimate beneficial owner. This refers to the individual(s) who benefit from the activities of a person or group of persons.
- Business Relationship: In addition to personal and beneficial ownership identification, companies must also establish the nature and purpose of the business relationship into which they are entering with the customer.
Customer Due Diligence (CDD) is required:
- When a new relationship is being established
- When there’s suspicion of money laundering or terrorism financing
- When a client performs an unusual transaction that exceeds regulatory threshold or involves entities in high-risk regions
- When there’s documentation deficiency, either due to insufficient CDD measures at the inception of the relationship, or due to updated regulatory requirements.
- During ongoing monitoring
Our highly skilled CDD team will guide your firm to achieve an effective CDD process, thereby minimizing your risk of wrong customer identification, classification, or onboarding.
