Financial Crime World

Combatting Money Laundering: Businesses Must Determine Exact Level of Risk Posed by Each Customer

To protect themselves from criminals, terrorists, and politically exposed persons (PEPs), businesses must conduct customer due diligence (CDD) to ensure that customers are trustworthy and do not pose a substantial money laundering risk.

Streamlining the Process with Risk-Based Due Diligence

Carrying out CDD on a risk-based basis can save time and money while ensuring compliance. The level of due diligence required depends on the level of risk posed by each customer. There are three levels of due diligence: Simplified Due Diligence (SDD), Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD).

Practical Steps to Include in a Due Diligence Program

Implementing a due diligence strategy can be daunting, but by following these key steps, businesses can ensure compliance with Know Your Customer (KYC) best practices:

  • Ascertain the identity and location of the potential customer
  • Gain an understanding of the customer’s business activities
  • Classify the risk category of the customer in question and define what type of customer they will be
  • Digitally store all the above information and any documentation provided
  • Create processes for ongoing monitoring and criteria for triggering additional due diligence measures

Factors that Indicate EDD is Required

If SDD or CDD measures show that a customer poses a heightened level of risk, businesses must follow the correct processes to establish whether EDD processes are required. Factors that may indicate EDD is necessary include:

  • The location of the customer
  • The customer’s occupation
  • The customer’s purpose for opening the account
  • Expected pattern of activity (including transaction type, volume, and frequency)
  • Expected payment methods
  • Whether transactions will be made across borders or with high-risk individuals

Continuous Monitoring

Customers must be identified and verified before they can open an account or access a service. However, their risk profile may change dramatically after the initial onboarding. Businesses have an obligation to respond by continuously monitoring each customer.

Some factors that may indicate unusual activity include:

  • Sudden spikes in activities or transaction values
  • Unusual cross-border activities
  • Interaction with people on sanctions lists
  • Adverse media mentions

How Veriff Supports KYC Monitoring and Checks

Veriff’s AML screening solution can help businesses comply with KYC regulations while prioritizing user experience. Our AI-powered AML solution provides an identity verification service, screens sanctions and PEP watchlists globally, and identifies negative news for predicate offenses and potential risk.

With our solution, businesses can:

  • Quickly and easily get real customers through the identity verification process
  • Stop fraud at the gates
  • Continuously monitor watchlists and adverse media for changes

By leveraging Veriff’s KYC compliance solutions, businesses can overcome KYC challenges, ensure a smooth onboarding process, and improve customer conversion rates. Contact our KYC experts today to book a free demo and learn more about how we can help your business.