By 
Customer due diligence, often known as CDD, is a competence that must be had by every anti-money laundering and countering the funding of terrorism (AML/CFT) analyst. CDD is typically where an investigation into a potentially suspicious transaction will get its start. Whenever a financial institution is in the process of establishing commercial contacts with such a potential customer, it is required by law in the majority of countries that have a robust AML/CFT framework that they do customer due diligence (CDD) throughout the onboarding stage.
What is “customer due diligence”?
Customer due diligence, taken literally, involves giving the customer the appropriate amount of care and attention. Along the same lines as safety, the significance of this has grown substantially over the past few years due to the prevalence of threats such as terrorist acts, instances of fraud, and the laundering of illicit funds. When beginning a new business partnership, it is critical to ensure that you have a solid understanding of the goals of your clients and have taken the appropriate precautions to mitigate any potential downsides. Customer due diligence is just a tool that assists you in getting to understand your clients and preventing engaging in business partnerships with people who could compromise the trust that is invested in the financial institution. You can read more about this in detail from the experts.
Importance of customer due diligence for banks-
The use of CDD is an essential weapon in the ongoing war against the laundering of illicit funds and the funding of terrorist organizations. In order to circumvent the AML and CFT regulations that are in place, criminals who are interested in legalizing the proceeds of their illicit activities will need to devise methods by which they can secretly move the proceeds of their activities into the legal, financial system. CDD gives companies a mechanism to identify clients who may be involved in illegal financial activity and to take appropriate compliance steps against such customers. This is done with the goal of thwarting criminal activity in the financial sector.
CDD is of utmost significance in settings that are either more complicated or at greater risk for the provision of financial services, including the digital platforms offered by challenger banks. Money launderers consider taking advantage of the built-in speed as well as anonymity of online banking services in such contexts to effectively cover up their identities by submitting false or inadequate personally identifiable information or even by using proxy servers to conduct financial transactions. This allows money launderers to move large amounts of money quickly and without drawing attention to themselves.
Ongoing Monitoring
Once a relationship has been built with the customer, CDD really shouldn’t come to an end. Transactions & account activity must be investigated on a consistent basis for the potential to facilitate money laundering or the financing of terrorist organizations. The actions of the customer, as well as his transactions and account balances, must be in accordance with the amount of activity that is anticipated from him. Due to the possibility that a customer’s risk profile can shift over time, continuous monitoring is an absolutely necessary practice. An analyst must keep in mind the activities on a customer’s account as well as ensure that all paperwork pertaining to the customer’s Know-your-customer (KYC) checks are kept current in order to undertake continuing monitoring effectively.
Conclusion
Enhanced customer due diligence is quickly becoming the standard operating procedure for institutions throughout all sectors of the economy. Because of the regulations that govern KYC and AML, the range of mandatory checks, as well as the specifics of those checks, are constantly growing more extensive. As the number of digital transactions continues to rise, it is becoming increasingly apparent that manual, time-consuming processes which are outmoded will simply not be able to keep up.
Comments