Customer Due Diligence (CDD)
Definition
The process of identifying and verifying the identity of a customer and their beneficial owner, understanding the purpose of the business relationship, and conducting ongoing monitoring. Governed by FATF Recommendation 10. Applies at three intensity levels: simplified, standard, and enhanced.
Related terms
- Beneficial Owner
- The natural person who ultimately owns or controls a legal entity or arrangement, as distinct from the nominee or registered owner. Anti-money-laundering...
- Beneficial Ownership
- The natural person(s) who ultimately own or control a legal entity or arrangement, or on whose behalf a transaction is conducted. FATF...
- Correspondent Banking
- A relationship in which one bank (the correspondent) provides services such as clearing and settlement to another bank (the respondent), allowing the...
- Enhanced Due Diligence (EDD)
- A heightened set of CDD measures applied to higher-risk customers or relationships, including PEPs, high-risk jurisdictions, and certain business types. EDD typically...
- FATF Recommendations
- The 40 international standards issued by the Financial Action Task Force that set out the measures countries should implement to prevent money...
- Mutual Evaluation Report (MER)
- An assessment of a country's compliance with the FATF Recommendations, conducted by FATF-style regional bodies or by FATF itself. Published publicly. Identifies...
- Politically Exposed Person (PEP)
- An individual who holds or has held a prominent public function, including senior government officials, judges, military officers, and their close family...
- Suspicious Activity Report (SAR)
- A disclosure filed with the financial intelligence unit when a reporting entity knows, suspects, or has reasonable grounds to suspect that a...
- Suspicious Activity Report (SAR) / STR
- A confidential report filed by a reporting entity to the national Financial Intelligence Unit when a transaction or pattern gives rise to...
- Transaction Monitoring System (TMS)
- An automated system that screens transaction data against a library of typologies and thresholds to generate alerts for potential money laundering. A...
Explained in these topics
- AML Compliance: KYC, CDD, and Suspicious Activity ReportingThe FATF-mandated set of measures requiring financial institutions to identify and verify customers and beneficial owners, understand the purpose and nature of...
- AML Compliance Audits and FATF StandardsThe process of identifying and verifying the identity of a customer and their beneficial owner, understanding the purpose of the business relationship, and con...