Many sectors are now requiring a Customer Due Diligence (CDD) process be put in place to comply with stringent regulations, this is to reduce fraudulent activity and help businesses with a Know Your Customer (KYC) initiative, for example, financial institutions must have AML/CFT processes in place to verify their customer identities and the nature of their business.
Customer due diligence, at its most basic form involves verifying a customer’s identity, and the businesses which they are involved, this needs to measure up to a sufficient level of confidence which the process may involve a number of regulatory obligations:
The application of customer due diligence plays a major part in the fight against money laundering or Anti Money Laundering (AML) which is delegated towards the Sanctions and Anti-Money Laundering Act 2018 (The Sanctions Act) which applies to the whole of the UK.
To serve and ensure the United Kingdom’s dealing with bona fide individuals and organisations, and assisting with the identification of suspicious behaviour, financial institutions must abide by this regime and perform the necessary Know your Customer (KYC) and Customer Due Diligence (CDD) checks when the following occurs:
Risk-Based Approach: Depending on the nature of your business, different levels KYC and CDD protocols will be required as part of regulation, in most cases customers or clients will be subjected to standard compliance measures which requires just customer contact identification in lower risk scenarios. For higher risk circumstances, cross matching against adequate sources is required, as well as biometric facial comparison against a photo taken, liveness authentication, international watchlist and sanction checks and assessments of business relationships may also be required.
When performing CDD checks, it can be as easy as obtaining the individuals contact data to ensure phone numbers are callable, emails are live and the address actually exists. furthermore, pending on the type of risk an organisation may be exposed too, more stringent processes and multi-levelled verification approaches may be necessary to gain a deeper understanding of who your customers really are.
Here are some CDD techniques businesses can perform.
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