Customer Due Diligence (CDD)
CDD is the process of identifying and verifying a client’s identity, assessing their source of funds and wealth, understanding the purpose of the business relationship, and evaluating the potential money laundering risks they pose.
Know Your Customer (KYC)
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CDD
Examples
A person wants to open a bank account. In order to stay compliant with AML and CFT regulations, the bank collects identifying information, screens the client, and assesses their risk profile as part of its customer due diligence process.
They don’t find any major red flags and therefore assign the person a medium risk level and finish up the process for opening the account. After this point, the bank reviews the account once a year, for example, or whenever certain conditions are met. For example, if the person suddenly starts making large international transfers.
FAQ
What are the minimum CDD requirements for new clients?
Minimum CDD includes identifying the client, verifying that identity, and understanding the purpose of the business relationship.
How does CDD differ for high-risk clients?
High-risk clients require enhanced due diligence with more detailed information collection and verification, and more frequent checks.
What ongoing CDD is required through the client lifecycle?
Ongoing CDD includes transaction monitoring and periodic KYC reviews to identify changes in client risk profiles over time.
