Know Your Customer (KYC) and Customer Due Diligence (CDD)
KYC due diligence and Customer Due Diligence (CDD) are the cornerstones of anti-money laundering and countering the financing of terrorism regulations. KYC focuses on verifying a client’s identity, while CDD goes beyond identity verification to examine a customer’s background and financial activities. This enables businesses to detect suspicious activity and meet compliance requirements.
The level of CDD a business conducts depends on a customer’s risk profile. Low-risk scenarios necessitate Simplified Due Diligence, which is a basic form of CDD that involves collecting primary information and monitoring money transfers and transactions. For higher-risk customers, like high net worth individuals or politically exposed persons (PEPs), enhanced due diligence is necessary. This process is more comprehensive and includes collecting additional documents, screening against official government lists, and examining transactional patterns to assess their risks.
KYC Due Diligence: Ensuring Compliance and Risk Management
A well-functioning KYC and CDD program requires clear standard operating procedures that clearly define responsibilities and processes, including reporting suspicious activity and transactions. Businesses also need a digital infrastructure that provides a single, consolidated view of all activity and allows them to quickly assess customer risk.
Developing the right digital solution is key to meeting compliance needs while improving customer experience and profitability. By investing in a comprehensive analytics platform, businesses can create the data-driven infrastructure they need to streamline their KYC and CDD processes. In addition, the platform should enable them to monitor and report suspicious transactions and identify potential risks in real time so they can take quick action.