Customer Due Diligence (CDD) is a regulatory requirement for financial institutions. CDD mandates that these institutions verify customer identities, understand the nature and purpose of the customer's relationship with the financial institution, and evaluate any risk factors present that could indicate involvement in fraud or other financial crimes. A financial institution's CDD practices are their first line of defense for detecting suspicious account activity, preventing money laundering, and staying in compliance with anti-financial crime regulations in the regions in which they operate.
Use case/ examples for Customer Due Diligence (CDD)
Customer identity: Verifying customer identities and evaluating risk profiles at account opening to meet AML and KYC requirements.
Transaction patterns: Monitoring all customer account transactions to identify unusual transaction patterns that may indicate money laundering or fraud.
Onboarding: Reviewing the source of funds and nature of existing business relationships during onboarding for high-risk clients.
Re-screening: Conducting periodic re-screenings of the customer base against sanctions and watchlists as part of ongoing due diligence."