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The Different Types of Customer Due Diligence Every AML/CFT Analyst Should Know




There are plenty of risks that companies encounter no matter what industry you’re in. After all, you’re dealing with money and with that always comes to some risks.

Since risks are present, then you should look into active ways that will keep you vigilant against it.

One of the ways you can do this is by hiring an AML/CFT Analyst. An AML/CFT Analyst helps by focusing on CDD processes in the company.

Now, those are a lot of acronyms so let’s cover what these are one-by-one:

CDD is the acronym for Customer Due Diligence. This is a process where an organization looks into and collects relevant customer data that can indicate whether these customers are risky to deal with.

An Anti-Money Laundering and Countering Financing of Terrorism Analyst or Officer is someone who specializes in looking for and/or managing any suspicious financial activity. They are a big help when it comes to protecting an organization from financial risks, and CDD is one of the ways they can do that.

With that said, some article on this website covers the different types of CDD that every AML/CFT Analyst or Officer should know about.


Standard Due Diligence

Standard due diligence is applicable to a majority of the cases that you’re going to encounter. This is also applied in other forms of CDD.

Basically, this is the standard operating procedure when it comes to CDD. What happens in standard due diligence is:

  1. You identify the identity of the customer. You can validate their identity through a variety of means. In particular, verification of identity can be satisfied through some form of photo-identification or documentation from governing bodies.
  2. Aside from verifying the identity of the customer, you should also check who are the ultimate owners of the business transacting with you. You need to check who is essentially in control of everything.
  3. Lastly, the purpose of the business relationship is also part of the standard due diligence.


Enhanced Due Diligence

If a customer appears to be at a higher level of risk to the organization in the business relationship, then an Enhanced Due Diligence or EDD needs to occur.

Aside from the Standard Due Diligence mentioned above, there are additional measures taken in EDD. There are no set rules to take as it will depend on the situation or the information gathered on the customer.

EDD is needed if the higher risk is identified based on the sort of services that you will be giving said customer.


Simplified Due Diligence

If there is a lower risk of a customer being involved in any form of a money-laundering scheme or terrorism financing scheme, then the lowest CDD that one can do is the Simplified Due Diligence.

The Simplified Due Diligence only needs identification from the customer and nothing more.

Of course, this doesn’t mean that over time this isn’t going to change. Thus, a continual check on the business relationship with the said customer is important to know if further checks need to be made.


Customer Acquisition Due Diligence

Customer Acquisition Due Diligence is simply something that you perform during the first time that a client transacts or gets into a business relationship with your organization, a bank, or a financial institution.

Initial checks may stop there or eventually, over time, further verifications may need to be made for security purposes.


Ongoing Customer Due Diligence

Speaking of needing further verifications over time, there is also a CDD called Ongoing Customer Due Diligence or OCDD.

OCDD is when you go back to the previous information you’ve gathered from a customer and review the issues that you encounter with them.

For example, you might need updated versions of certain documentation from your customer. That’s one of the ways an OCDD might have to manifest.

Customer Due Diligence should be a customary practice in every organization, especially in organizations that require a bit more extra security. With that said, whether you’re looking to hire an AML/CFT Analyst, then these types of CDDs listed above should be helpful to you.

Knowing them even by a little bit can help guide you in the right direction when it comes to reducing financial risks for your organization.

Andi Croft is a freelance writer whose main interests are topics related to business, technology, and travel. This is brought about by her passion about going around the world, meeting people from all walks of life, and bringing along with her the latest tech to enhance her adventures.