Anti-Money Laundering (AML) Regulations: Customer Due Diligence Requirements

Financial institutions are required to conduct customer due diligence (CDD) as part of their anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations. The following are key points outlining the requirements for CDD:

Customer Due Diligence (CDD)

• Financial institutions must conduct CDD on all new customers, including individuals and businesses.
• This involves verifying the identity of customers, beneficial owners, and directors.

Identity Verification

• Institutions must verify the identity of customers through reliable and independent sources.
• Beneficial owners and directors must also be identified and verified.
• Information about the purpose and nature of business relationships must be obtained.

Risk-Based Approach

• A risk-based approach to CDD is required, taking into account factors such as:
  • Country or geographic region
  • Product or service
  • Transaction or delivery channel

Simplified CDD Measures

• Institutions may apply simplified CDD measures where the risk is lower.
• However, this should not be done in situations involving suspicion of money laundering or terrorist financing.

Third-Party Providers

• Institutions must verify that third-party providers have adequate systems and controls in place for customer due diligence.
• This includes verifying the identity of customers and beneficial owners.

Cross-Border Correspondent Banking

• Additional requirements apply to cross-border correspondent banking relationships.
• Institutions must gather information about respondent banks and assess their anti-money laundering and terrorist financing controls.

Record-Keeping Requirements

• Financial institutions must maintain proper record-keeping procedures, including:
  • Retaining records of CDD measures taken
  • Being able to provide these records upon request to supervisory authorities