DEFINITION
Standard Due Diligence
Standard Due Diligence is a form of Customer Due Diligence that is used when a customer is low-to-medium risk. As such, it is the most common form of Customer Due Diligence. Due to this fact, the term Standard Due Diligence can even be used interchangeably with Customer Due Diligence, which is the umbrella term, in some contexts.
Like all forms of Due Diligence, it includes identifying and verifying the customer’s identity, performing background checks, and monitoring them for any suspicious activity. However, the intensity and frequency of these checks differs. Standard Due Diligence is more robust than Simplified Due Diligence but not as robust as Enhanced Due Diligence, which is reserved for high-risk customers.
Synonyms
Customer Due Diligence (CDD)
Acronyms
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Synonyms
Customer Due Diligence (CDD)
Acronyms
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Examples
A person fills out an application to open a bank account. After identifying and verifying the person’s identity, the bank performs a series of background checks. They see that the person isn’t a Politically Exposed Person, isn’t under sanctions, doesn’t reside in a high-risk country and has no negative press about them. They therefore aren’t suited for Enhanced Due Diligence. However, due to the bank’s risk tolerance, the person also isn’t suited for Simplified Due Diligence. Therefore, Standard Due Diligence is performed.
FAQ
What are the types of CDD?
Customer Due Diligence (CDD) has three forms: Simplified, Standard and Enhanced Due Diligence. Which form is used depends on the customer’s risk profile, with Simplified Due Diligence being used for low-risk, Standard for low-to-medium risk, and Enhanced for high-risk customers.
When is Standard Due Diligence necessary?
Standard Due Diligence is used when processing low-to-medium risk customers, which is the case in the vast majority of cases.
What is the difference between Standard and Simplified Due Diligence?
Simplified Due Diligence is a less robust form of Standard Due Diligence. It therefore requires less meticulous background checks and while rare, some jurisdictions even allow for the verification step to be skipped.
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