Question: What Is The Definition Of Customer Due Diligence CDD?

What is KYC process?

KYC means Know Your Customer and sometimes Know Your Client.

KYC or KYC check is the mandatory process of identifying and verifying the identity of the client when opening an account and periodically over time.

In other words, banks must make sure that their clients are genuinely who they claim to be..

What is a high risk customer?

Higher Risk Customers are those who are engaged in certain professions or avail the banking products and services where money laundering possibilities are high. … Financial Institutions conduct enhanced due diligence (EDD) and ongoing monitoring for the higher risk customers.

What is remediation in KYC?

The KYC Remediation Process Financial institutions are strictly regulated in regards to financial crime. … The remediation process is where they clear up any contradictory data, organize the information they have acquired, and determine what else is left for them to find out about the client.

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…

What are CDD requirements?

The CDD Rule requires that financial institutions maintain “appropriate risk-based procedures for conducting ongoing customer due diligence,” including “[u]nderstanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile” and “[c]onducting ongoing monitoring to …

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 are the 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.

What’s the meaning of due diligence?

Due diligence is the investigation or exercise of care that a reasonable business or person is normally expected to take before entering into an agreement or contract with another party or an act with a certain standard of care.

What is CDD in KYC process?

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.

What is CDD and EDD?

The second step is Customer Due Diligence (“CDD”) which requires the bank to obtain information to verify the customer’s identity and assess the risk. … If the CDD inquiry leads to a high risk determination, the bank has to conduct an Enhanced Due Diligence (“EDD”).

What are the 3 stages of money laundering?

There are three stages of money laundering, each with a unique purpose. The first stage is placement, second is layering and third is integration.

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 ongoing due diligence?

conduct ongoing due diligence on the. business relationship, including: ▪ b) ensuring that documents, data or information. collected under the CDD process is kept up-to-date and. relevant, by undertaking reviews of existing records, particularly for higher risk categories of customers.

What is the purpose of CDD?

The objective of CDD is to enable the bank to understand the nature and purpose of customer relationships, which may include understanding the types of transactions in which a customer is likely to engage. These processes assist the bank in determining when transactions are potentially suspicious.

What is the CDD process?

CDD is the process where pertinent information of a customer’s profile is collected and evaluated for potential money laundering or terrorist financing risks. … This methodology is also known as the risk-based approach, which allows a company to prioritise resources accordingly to areas that require more attention.

What are the levels of customer due diligence?

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

What is the EDD process?

Enhanced due diligence (EDD) is a KYC process that provides a greater level of scrutiny of potential business partnerships and highlights risk that cannot be detected by customer due diligence. EDD goes beyond CDD and looks to establish a higher level of identity assurance by obtaining the customer’s identity and …

Why is CDD important?

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.