Financial Crime World

Conducting Customer Due Diligence in Financial Institutions

Risk Factors

Financial institutions must conduct customer due diligence (CDD) measures as recommended by the Financial Action Task Force (FATF). The following are key risk factors to consider:

  • Customer Risk Factors: Life insurance policies with low premiums, pension schemes without early surrender options, and certain types of customers that provide limited services for financial inclusion purposes.
  • Country Risk Factors: Countries identified by credible sources as having effective anti-money laundering (AML) and combating the financing of terrorism (CFT) systems or low levels of corruption.

Risk Variables

The following risk variables should be considered when conducting CDD measures:

  • The purpose of an account or relationship
  • The level of assets to be deposited by a customer or the size of transactions undertaken
  • The regularity or duration of the business relationship

Enhanced CDD Measures

For higher-risk customers, enhanced CDD measures should be implemented:

  • Obtaining additional information on the customer, such as occupation and volume of assets
  • Updating identification data more frequently
  • Conducting enhanced monitoring of the business relationship
  • Requiring senior management approval to commence or continue a business relationship
  • Selecting patterns of transactions that need further examination

Simplified CDD Measures

For lower-risk customers, simplified CDD measures can be applied:

  • Verifying customer identity after establishing a business relationship (e.g., if account transactions exceed a defined monetary threshold)
  • Reducing the frequency of customer identification updates
  • Reducing ongoing monitoring and scrutinizing transactions based on a reasonable monetary threshold
  • Inferring the purpose and nature of a business relationship from the type of transactions or established relationship

Thresholds

The designated threshold for occasional transactions is:

  • USD/EUR 15,000

Ongoing Due Diligence

Financial institutions should regularly review existing records, particularly for higher-risk categories of customers, to ensure that documents, data, and information collected under CDD measures remain up-to-date and relevant.