Customer Due Diligence
CDD (Customer Due Diligence) refers to the measures that regulated entities must apply to identify their customers, understand the nature of their activities, and assess the risk of money laundering or terrorist financing. CDD forms the operational foundation of KYC processes.
Customer due diligence comprises three levels of intensity: simplified measures for low-risk customers, standard measures applicable by default, and enhanced measures (EDD) for high-risk situations. Each level involves different requirements for information collection, document verification, and transaction monitoring.
Under standard CDD, the business must identify the customer and verify their identity using reliable documents, identify the beneficial owner where applicable, obtain information about the purpose and intended nature of the business relationship, and conduct ongoing monitoring. These obligations apply at the establishment of the business relationship, for occasional transactions above certain thresholds, when money laundering is suspected, and when the reliability of previously obtained information is in doubt.
The automation of CDD through document verification technologies enables businesses to standardise controls and reduce the risk of human error. CheckFile.ai facilitates CDD implementation by automatically verifying the authenticity of identity documents and extracting the data required for risk profile assessment.
Regulations
Real-world examples
- 1.A notary collects identity documents and proof of address from all parties before signing a property sale agreement.
- 2.An accountant verifies the director's identity and the ownership structure of a client company when accepting a new engagement.
- 3.An asset management firm applies enhanced CDD measures for a client whose funds originate from a high-risk jurisdiction.