What is customer due diligence?

By Ritesh|Updated : September 3rd, 2022

Customer due diligence is how financial organizations gather and assess pertinent information about a customer or potential customer. Its goal is to reduce the financial institution’s risk when working with a particular company or person by analyzing data from various sources.

Customer Due Diligence (CDD) for Customers

Customer information:

  • Businesses get the full name, photo ID, address, phone number, email address, occupation, tax identification number, and more from customers to verify that they are who they claim to be.

Company Information:

  • Additional identifying data regarding the customer's business model, funding source, and beneficial ownership should be included in CDD measurements.
  • Customer Risk Profiles and Risk Evaluations Customers are categorized into different risk levels (often low, medium, and high) to show the level of money laundering risk they pose based on their identity, location, and type of business.
  • How much due diligence is necessary depends on the consumer's risk profile.
  • High-risk customers require a more thorough due diligence procedure compared to low-risk consumers.

Monitoring Continues:

  • After a consumer is signed up, the due diligence process continues.
  • A continuous monitoring system should be used as CDD efforts to monitor higher-risk consumers, shady transactions, shifting customer profiles, etc.

Summary:

What is customer due diligence?

The process through which financial institutions obtain and evaluate pertinent data on a client or potential client is known as customer due diligence. Analyzing data from many sources seeks to lower the financial institution’s risks it might encounter while interacting with a specific business or individual.

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