Customer Due Diligence (CDD) refers to the act of performing background checks and other screening on a potential customer to ensure that they are properly risk assessed before being onboarded.
At a basic level, CDD requires firms to collect details of a customer’s name and address, information about the business in which they are involved, their source of wealth and source of funds and how they will use their account. In order to complete this assessment, companies should verify the information received from the customer with reference to official documents such as driving licenses, passports, utility bills, and if appropriate, corporate documentation.
CDD is a foundation of the Know Your Customer (KYC) process, which requires companies to understand who their customers are, their financial behavior, and what kind of money laundering or terrorism financing risk they present.
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