Customer due diligence (CDD)

What is CDD?

Customer due diligence is the process by which a company identifies and verifies the authenticity and nature of its prospective customers.

CDD and KYC-Know Your Customer-are cornerstones in any AML-Anti Money Laundering-policy formulated by a company, and these are based upon the requirement to verify the identity of the customers with which those companies falling under the purview of AML regulations transact business.

In other words, KYC is about showing Customer Due Diligence, i.e., very much verifying a customer’s identity, so that it is tough to distinguish between KYC and CDD because the latter forms an intrinsic part of the former.

What CDD procedure consists of?

The CDD procedure generally consists of the following steps:

• Video/Liveness Checks: Verification of a customer’s identity by live video interaction with them to ascertain that they exist and are actual.
• Document Verification: Identification documents reviewed and verified for authenticity.
• Sanctions Lists: The processing of customers against lists of sanctions to see if there could be some sort of legal or regulatory barrier associated with them.
• Digital Footprint Analysis: Assessing customers’ online behaviour and presence to gauge their credibility.

Analysis of Public and Private Data Sources: It leverages a combination of public sources and proprietary sources to collect extensive information about the customer.

These steps will help an enterprise reduce the risks in its business and also ensure compliance with all the necessary legal formalities to conduct operations in a safe and secure manner.