What is Customer Due Diligence?

To perform customer due diligence - also known as CDD - firms must identify the client, and then verify they are who they’re claiming to be. This process involves obtaining details about the individual, including their name, photograph, address and date of birth. This is usually done by gaining access to documents like passports, driving licenses or utility bills.

What CDD checks are needed for a business?

 To carry out customer due diligence for a business, you’ll need to check the company is registered with Companies House, and identify any persons of significant control (PSCs). You’ll also need to find out if there are any ultimate beneficial owners, as well as looking at the company's annual returns and statements. 

When is CDD required?

The CDD process is a crucial part of every firm’s effort to remain AML compliant. By verifying the identity of your potential client, you minimise the chance of going into business with a high-risk individual or entity, who could make your company more vulnerable to money laundering.

Customer due diligence is required at the onboarding stage, when your firm is in the process of bringing in a new customer. Every firm that’s subject to money laundering regulations should be performing CDD as part of their risk-based approach to AML. This not only includes all businesses in the financial services sector, but also:

• High value dealers

• Estate agents

• Money service businesses, that aren’t monitored by the FCA

• Telecom, digital & IT payment services that aren’t monitored by the FCA

• Bill payment service providers that aren’t monitored by the FCA

How are CDD checks performed?

Most firms still complete their customer due diligence manually. This involves checking physical ID documents to verify the person’s name, address and date of birth, and then checking that person’s details against sanctions and PEP lists.

However, manual checks leave room for human error, as passports and other documents can be easily forged. Electronic ID verification is by far the most reliable way to complete AML checks, as it cross-checks a person’s details using multiple data platforms, as well as screening for sanctions and PEPs. If the documents or details provided are fake, electronic ID verification will expose this. 

SmartSearch and CDD

SmartSearch is a unique AML platform, which uses electronic ID verification to perform CDD quickly and accurately. This end-to-end product incorporates fully automated sanction, PEP, SIP and RCA screening, offering a ‘one-stop-shop’ to verify individuals and businesses. The platform also offers daily monitoring to ensure all client firms remain fully compliant and protected throughout the life of their contract.