CDD stands for "Customer Due Diligence." It is a term commonly used in the field of financial services, particularly in banking and money laundering prevention. Customer Due Diligence refers to the process of gathering and verifying comprehensive information about a customer, typically prior to establishing a business relationship or conducting financial transactions.
CDD aims to evaluate and assess the potential risks associated with a particular customer or business entity in order to comply with legal and regulatory requirements, prevent fraud, and mitigate the risk of money laundering or terrorist financing activities. This process involves gathering identification and contact details, as well as assessing the customer's background, financial history, and business activities, to determine the level of risk involved in establishing and maintaining a relationship with them.
The level of due diligence required may vary depending on the nature of the customer, the services provided, and the jurisdiction's regulations. CDD generally includes obtaining and verifying identity documents, conducting background checks, assessing the purpose and intended nature of the business relationship, and monitoring subsequent transactions for suspicious activities.
The objective of CDD is to establish a reasonable level of confidence in the integrity of customers, ensuring they are not involved in illegal activities and preventing unauthorized access to financial systems. CDD helps financial institutions and other businesses make informed decisions regarding potential risks and enables them to fulfill their legal and ethical obligations, protecting the financial system's integrity and contributing to the prevention of money laundering and terrorist financing.
