🔹 Definition
Customer Due Diligence (CDD) is the process by which financial institutions and other regulated entities identify and verify the identity of their customers, assess the risk they pose, and gather sufficient information to understand the purpose and nature of the business relationship. CDD is a core requirement under most Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) regulations worldwide.
The goal of CDD is to prevent the misuse of financial systems by criminals, terrorists, or other bad actors. It typically includes verifying identity documents, screening against sanctions and PEP lists, assessing geographic and transaction risks, and monitoring customer behavior over time.
🔹 Frequently Asked Questions (FAQs)
Q1: When is CDD required?
CDD is generally required:
- When establishing a new business relationship
- When carrying out occasional transactions above a threshold (e.g., USD 10,000)
- When there is a suspicion of money laundering or terrorist financing
- When customer information appears inconsistent or outdated
Q2: What information is collected during CDD?
For individuals:
- Full name, date of birth, nationality
- Residential address and identification documents
- Source of funds and occupation
For legal entities: - Company name and registration number
- Business address and nature of business
- Directors and Beneficial Owners (UBOs)
Q3: What are the different levels of CDD?
- Standard CDD: Applied to most customers; includes basic identity verification
- Simplified Due Diligence (SDD): For low-risk customers (if permitted by regulation)
- Enhanced Due Diligence (EDD): For high-risk customers such as PEPs or clients from high-risk jurisdictions
Q4: How is CDD different from KYC?
CDD is part of the broader Know Your Customer (KYC) process. KYC encompasses identity verification, CDD, ongoing monitoring, and risk assessments. CDD focuses specifically on verifying customer identity and understanding the relationship.
