Due to continuously changing legislation and heavy regulatory pressure, banks and financial institutions are constantly challenged to comply with the latest requirements, and take their responsibility to eradicate financial and economic crime. One of the measures that banks/FI's have to take in order to comply, is Customer Due Diligence (CDD). Customer Due Diligence includes all activities that relate to getting an understanding of the client, its activities, and its intentions for getting into a relationship with the bank. CDD is also widely known as ‘Know Your Customer’.
The purpose of CDD is to come to a balanced conclusion about the risks that the client poses to the bank, in the field of money laundering and terrorist financing. By mapping out effective client risk profiles, further action can be taken to mitigate the risk of getting involved with money laundering or terrorism financing.
Four area's of KYC/CDD focus are:
a: Certain degrees of transaction monitoring, b: Regular reviews of the client’s risk profile; c: Ongoing screening of the client and associated parties against sanction, PEP, and watch lists; d: Client offboarding, in case of unacceptable risks;
Generally, the process of KYC/CDD consists of the following steps:
1 Identification and verification of the client’s directors and authorized signatories; 2 Identification and verification of the client’s ownership structure and the ultimate beneficial owners (UBO); 3 Understanding the business of the client, in relation with the purpose of the relationship with the bank; 4 Understanding the source of funds that the client brings into the bank accounts; 5 Screening the client and all related parties; 6 Assessing the money laundering risk;