Quick Answer: How Do You Conduct Customer Due Diligence?

What is customer due diligence process?

Customer Due Diligence (CDD) information comprises the facts about a customer that should enable an organisation to assess the extent to which the customer exposes it to a range of risks.

These risks include money laundering and terrorist financing..

What is proof of due diligence?

Due diligence in food safety refers to being able to prove that your business has done everything reasonably possible to prevent food safety breaches. … It helps to prove that you applied all reasonable precautions and due diligence to avoid committing an offence.

What is the CDD rule?

Information on Complying with the Customer Due Diligence (CDD) Final Rule. The CDD Rule, which amends Bank Secrecy Act regulations, aims to improve financial transparency and prevent criminals and terrorists from misusing companies to disguise their illicit activities and launder their ill-gotten gains.

What is difference between CDD and EDD?

CDD aims at collecting data about customers’ identity and contact information as well as measuring their risk. EDD is used for high-risk customers, aka those who are more likely to implement related to money laundering and terrorism financing activities due to the nature of their business or transactions.

When should CDD be performed?

When is CDD Required?New business relationship: Companies must perform due diligence measures prior to establishing a business relationship to ensure the customer matches their risk profile and isn’t using a fake identity.Occasional transactions: Certain occasional transactions warrant CDD measures.More items…

Why due diligence is required?

The meaning of due diligence is to ‘have a measure of prudence’ or to ‘perform a prudent review’. … Financial due diligence in particular allows the buyer to assess all financial aspects of a potential acquisition to determine what the benefits, liabilities, risks and opportunities are.

What are the 4 due diligence requirements?

The Four Due Diligence RequirementsComplete and Submit Form 8867. … Compute the Credits Based on the Facts. … Ask All the Right Questions. … Keep Records.

What are the types of CDD?

There are three levels of customer due diligence: standard, simplified and enhanced.Standard customer due diligence.Simplified customer due diligence.Enhanced customer due diligence.

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) …

How do you conduct CDD?

Customer Due Diligence Checklist – Five Steps to Improve Your CDDPerform CDD measures before entering into a business relationship with your client to detect any bad actors early on. How? … Strengthen your processes when vetting third parties. … Ensure that pertinent information has been collected and stored securely. … Detect if there is a need for EDD. … Keep historical records on hand.

When should customer due diligence be carried out?

You must carry out customer due diligence measures when your business carries out occasional transactions. These are transactions that are not carried out within an ongoing business relationship where the value is: €15,000 or more if you’re not a high value dealer (or the equivalent in other currencies)

Why customer due diligence is important?

Customer due diligence (CDD) is at the heart of Anti-Money Laundering (AML) and Know Your Customer (KYC) initiatives, and is designed to help banks and financial institutions verify if customers are who they say they are, confirm they’re not on any prohibited lists and assess their risk factors.

What is due diligence example?

It can be a legal obligation, but the term will more commonly apply to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for an acquisition.

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 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 due care and due diligence?

Due care is a way to implement something right away in order to perform mitigation procedures. Due diligence is making sure the right thing was done correctly, and if it is necessary to do it again or if further research is required. Due care is doing the right thing, the prudent man rule.

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.

Who requires enhanced due diligence?

When is Enhanced Due Diligence (EDD) applied? EDD is required for ‘high risk’ customers, i.e. those who are more likely to be involved in money laundering, terrorist financing or fraud-related activities.

Is CDD and KYC the same?

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.

Which accounts require a higher level of due diligence?

Enhanced due diligence is specifically designed for dealing with high-risk or high-net worth customers and large transactions. Because these customers and transactions pose greater risks to the financial sector, they are heavily regulated and monitored in order to ensure that everything is on the up and up.