Question: What Is Customer Due Diligence?

Why is customer due diligence important?

The Importance of Customer Due Diligence Understanding your customer makes great business sense as you respond to their needs, but it is also a hugely effective tool in the battle to prevent money launderers, terrorist financiers and other criminals exploiting your organisation and the wider financial system..

What records must be kept for customer due diligence?

Records must be kept of clients’ identity, the supporting evidence of verification of identity (in each case including the original and any updated records), the business relationships (Customer due diligence overview) with them (including any non-engagement related documents relating to the client relationship) and …

What does customer due diligence mean?

taking stepsCustomer due diligence means taking steps to identify your customers and checking they are who they say they are. In practice this means obtaining a customer’s: name. photograph on an official document which confirms their identity.

How do you perform customer due diligence?

Customer due diligence is the process of identifying your customers and checking they are who they say they are. In practice, this means obtaining a customer’s name, photograph on an official document which confirms their identity and residential address and date of birth.

What is standard due diligence?

Standard due diligence requires you to identify your customer as well as verify their identity. … This due diligence should provide you with confidence that that you know who your customer is and that your service or product is not being used as a tool to launder money or any other criminal activity.

What information is required for CDD?

FinCEN believes that there are four core elements of customer due diligence (CDD), and that they should be explicit requirements in the anti-money laundering (AML) program for all covered financial institutions, in order to ensure clarity and consistency across sectors: (1) Customer identification and verification, (2) …

What are the three 3 components of KYC?

To create and run an effective KYC program requires the following elements: Customer Identification Program (CIP) How do you know someone is who they say they are? … Customer Due Diligence. … Ongoing Monitoring.

What are the 3 stages of anti money laundering?

There are usually two or three phases to the laundering:Placement.Layering.Integration / Extraction.

What should a bank apply customer due diligence?

The application of customer due diligence is required when a firm covered by money laundering regulations enters into a business relationship with a customer or a potential customer. This includes occasional one-off transactions even though this may not constitute an actual business relationship.

Why is CDD needed?

When is CDD Required? The application of Customer Due Diligence (CDD) is required when companies with AML processes enter a business relationship with a customer or a potential customer to assess their risk profile and verify their identity.

What is difference between KYC and CDD?

KYC vs. CDD: When are they used? For regulated entities, the KYC checks that sufficed in the past have now developed into CDD programmes, and the main difference between KYC and CDD, apart from the emphasis on the source of funds, is that the CDD checks continue throughout the client relationship.

What is CDD in KYC process?

Customer Due Diligence (CDD) or Know Your Customer (KYC) policies are the cornerstones of an effective AML/CTF program. Put simply, they are the act of performing background checks on the customer to ensure that they are properly risk assessed before being onboarded.

What is the CDD process?

CDD is the process where pertinent information of a customer’s profile is collected and evaluated for potential money laundering or terrorist financing risks. … This methodology is also known as the risk-based approach, which allows a company to prioritise resources accordingly to areas that require more attention.

When should customer due diligence be performed?

Entering a new business deal: Companies must perform thorough due diligence prior to establishing a business relationship in order to ensure the customer matches their risk profile and isn’t using a false identity.

Who qualifies for simplified due diligence?

The following clients and products qualify: A credit or financial institution which is subject to the requirements of the third money laundering directive. A credit or financial institution in a non-EEA state which is supervised for compliance with requirements similar to the third money laundering directive.

What is Bank due diligence?

What Is Due Diligence? Due diligence is an investigation, audit, or review performed to confirm the facts of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party.

What is CDD and EDD?

The second step is Customer Due Diligence (“CDD”) which requires the bank to obtain information to verify the customer’s identity and assess the risk. … If the CDD inquiry leads to a high risk determination, the bank has to conduct an Enhanced Due Diligence (“EDD”).