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Customer Due Diligence (CDD)

Overview

Customer Due Diligence (CDD) is the process of verifying a customer’s identity and assessing their risk level before offering financial services. It ensures that institutions know their customers, comply with AML rules, and prevent criminals from exploiting the financial system.

CDD involves checking documents, validating identity, and monitoring customer activity for unusual patterns. It forms the baseline for AML compliance globally, with stricter checks (Enhanced Due Diligence) applied for higher-risk customers.

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Related Terms

Enhanced Due Diligence (EDD)

Know Your Customer (KYC)

Risk Based Approach (RBA)

FAQ

What does CDD involve?

Collecting identity documents, verifying ownership, and assessing financial risk.

Why is it important?

It helps organizations stay compliant with AML laws and avoid regulatory penalties.

Who performs CDD?

Banks, fintechs, insurers, and regulated businesses.

How does it differ from EDD?

EDD is more detailed and applied to high-risk or complex customers.