What is CDD and why is it important?
Customer due diligence (CDD) is the act of performing background checks and other screening on the customer to ensure that they are properly risk-assessed before being onboarded. CDD is at the heart of Anti-Money Laundering (AML) and Know Your Customer (KYC) initiatives.
What does CDD mean in finance?
In early May, the U.S. Department of the Treasury announced the final publication of a rule which requires the financial industry to identify client companies’ “beneficial owners.” The rule, known as the Customer Due Diligence (CDD) rule, specifically requires that banks, brokers, and other financial institutions …
Why CDD and EDD is important?
Enhanced Due Diligence (EDD) is a risk-sensitive form of Customer Due Diligence (CDD). Enhanced Due Diligence (EDD) is applied to the higher-risk customers and requires more detailed information about the customer in addition to the basic Customer Due Diligence (CDD) requirements.
What are the three types of CDD?
There are three levels of customer due diligence: standard, simplified and enhanced.
What are the 4 elements of customer due diligence?
The CDD Rule includes four core elements of customer due diligence, each of which should be included in the anti-money-laundering (AML) program of a CFI: (1) customer identification and verification, (2) beneficial ownership identification and verification, (3) understanding the nature and purpose of customer …
Who is responsible for CDD?
It is important to remember that regulatory responsibility for CDD remains with the company rather than the third party. Accordingly, companies should ensure that their CDD service provider fulfills certain compliance criteria, and is able to: Meet the compliance standards set out in FATF Recommendation 10.
What is the CDD rule 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 are the CDD rule requirements?
What are the two main components of CDD?
What is CDD checklist?
A customer due diligence (CDD) checklist is a critical part of any business’s compliance program. This document helps companies identify and assess the risk associated with their clients. To mitigate those potential threats, businesses must collect information about their customers and take steps to verify it.
What are the components of CDD?
CDD processes are crucial for Know Your Customer (KYC), and while they vary around the world, in most cases, they involve identifying your customer and understanding their activities.
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How?
- Name.
- Address.
- Date of birth.
- Telephone number.
- National ID number.
- Identity documents.
- Mobile network data.
- Geolocation.
What is required for CDD?
The CDD Rule has four core requirements. It requires covered financial institutions to establish and maintain written policies and procedures that are reasonably designed to: identify and verify the identity of customers. identify and verify the identity of the beneficial owners of companies opening accounts.
When should CDD be completed?
Ongoing monitoring: CDD is not a one-off obligation. Companies should perform CDD periodically throughout a business relationship in order to ensure that customers’ transactions are consistent with their established risk profiles.
Who is exempt from CDD rule?
Exempted entities include, among others, domestic banks, bank holding companies, savings and loan holding companies, federal or state credit unions, and FinCEN-registered money services business; certain issuers of securities registered with the Securities and Exchange Commission; certain entities registered with the …
When should a bank apply CDD?
Banks enter into relationships with their customers. It can be a long term relationship or a one-off transaction. To assess their risk profile and verify their identity, CDD is conducted. When documents provided by the customer are unreliable and the bank has doubts, Customer Due Diligence (CDD) must be conducted.
What are the 4 customer due diligence requirements?
What are the main components of CDD?
When should CDD be performed?