Quick Answer: What Is The Difference Between Customer Due Diligence And Enhanced Due Diligence?

What are the 3 components of KYC?

The 3 Components of KYCThe first pillar of a KYC compliance policy is the customer identification program (CIP).

The second pillar of KYC compliance policy is customer due diligence (CDD).

The third pillar of KYC policy is continuous monitoring.

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Which countries require enhanced due diligence?

Afghanistan, Bosnia and Herzegovina, Ethiopia, Guiana, Iraq, Iran, North Korea, Laos, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Uganda, Vanuatu and Yemen are currently listed as high-risk third countries.

How do you carry out enhanced due diligence?

How to Conduct Enhanced Due Diligence: A GuidelineStep 1: Employ a Risk-Based Approach. … Step 2: Obtain Additional Identifying Information. … Step 3: Analyze the Source of Funds / Wealth and Ultimate Beneficial Ownership (UBO) … Step 4: Ongoing Transactions Monitoring. … Step 5: Adverse Media and Negative Check.More items…

What is enhanced customer due diligence?

Enhanced customer due diligence involves making extra checks on a customer’s identification, collecting additional information and doing additional verification. Carrying out ECDD allows you to decide whether a suspicious matter should be reported.

What is enhanced due diligence checklist?

Enhanced Due Diligence (“EDD”) is additional information collected for higher-risk customers to provide a deeper understanding of customer activity to mitigate associated risks. Customer risk assessments can be used to determine which level of due diligence to apply.

What is world check in AML?

World-Check is a database of Politically Exposed Persons (PEPs) and heightened risk individuals and organizations, used around the world to help to identify and manage financial, regulatory and reputational risk.

Why is CDD needed?

When is CDD Required? The application of Customer Due Diligence (CDD) is required when companies with AML processes enter a business relationship with a customer or a potential customer to assess their risk profile and verify their identity.

When should a bank apply customer due diligence?

The customers have less probability of being involved in money laundering or terrorist financing. Enhanced Due Diligence or EDD is required when a customer is perceived to be at a higher risk to the company.

Why is EDD required?

In the prevention of money laundering and terrorist financing, EDD has become the standard practice. EDD is required before any business relationship or deal can be reached between two parties. … For suspicion of money laundering or when there is a suspicious activity monitoring.

What are the 4 pillars of AML?

For years, financial institutions have operated under the maxim that an effective anti-money laundering and Bank Secrecy Act compliance program (collectively “AML”) rests upon four pillars: (1) written policies and procedures; (2) a designated AML compliance officer; (3) independent testing of the institution’s AML …

What is the KYC process?

KYC means Know Your Customer and sometimes Know Your Client. KYC or KYC check is the mandatory process of identifying and verifying the identity of the client when opening an account and periodically over time. In other words, banks must make sure that their clients are genuinely who they claim to be.

Who is beneficial owner in KYC?

What is Beneficial Ownership? According to the FATF, “beneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted.

What is the definition of enhanced due diligence EDD?

Enhanced due diligence (EDD) is a KYC process that provides a greater level of scrutiny of potential business partnerships and highlights risk that cannot be detected by customer due diligence. EDD goes beyond CDD and looks to establish a higher level of identity assurance by obtaining the customer’s identity and …

What is standard due diligence?

Standard due diligence requires you to identify your customer as well as verify their identity. … This due diligence should provide you with confidence that that you know who your customer is and that your service or product is not being used as a tool to launder money or any other criminal activity.

What is the CDD rule?

Information on Complying with the Customer Due Diligence (CDD) Final Rule. The CDD Rule, which amends Bank Secrecy Act regulations, aims to improve financial transparency and prevent criminals and terrorists from misusing companies to disguise their illicit activities and launder their ill-gotten gains.

How do you conduct customer due diligence?

Customer due diligence is the process of identifying your customers and checking they are who they say they are. In practice, this means obtaining a customer’s name, photograph on an official document which confirms their identity and residential address and date of birth.

What is the difference between CDD and EDD?

CDD aims at collecting data about customers’ identity and contact information as well as measuring their risk. EDD is used for high-risk customers, aka those who are more likely to implement related to money laundering and terrorism financing activities due to the nature of their business or transactions.

What is the difference between KYC and CDD?

What’s the difference between KYC and CDD? CDD (Customer Due Diligence) is the process of a business verifying the identity of its clients and assessing the potential risks to the business relationship. KYC is about demonstrating that you have done your CDD.