Customer Due Diligence
Customer Due Diligence is the core legal obligation under MLR 2017 to identify clients, verify their identity using reliable independent sources, and understand the purpose and intended nature of the business relationship. Standard CDD applies to most clients. Where risk is elevated, Enhanced Due Diligence (EDD) is required instead.
a CDD file for a sole trader typically includes identity evidence (passport or driving licence), address evidence (utility bill or bank statement), and a note on the nature of services to be provided.
Other terms that go with Customer Due Diligence
Enhanced Due Diligence is a more thorough level of client verification required when a relationship presents a higher risk of money laundering or terrorist financing. EDD steps typically include verifying the source of funds, establishing source of wealth, obtaining senior management approval before onboarding, and applying more frequent ongoing monitoring.
Simplified Due Diligence is a reduced level of KYC that may be applied where the money laundering risk is demonstrably low — for example, for certain regulated financial institutions, listed companies, or UK public authorities. SDD does not mean no checks at all; it means the checks can be less extensive if risk justifies it.
In AML, risk assessment operates at two levels. A firm-wide risk assessment identifies the overall money laundering risks facing a practice — covering client types, services offered, geographies, delivery channels, and funding sources. A client risk assessment scores an individual client as low, medium, or high risk and determines what level of due diligence to apply.
Put Customer Due Diligence into practice with Certivus
Knowing the term is the first step. Certivus gives you the workflows — client intake, CDD, EDD, PEP and sanctions screening, audit-ready records — to apply it across every client.
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