What is Customer Due Diligence?
When applied and used appropriately, Customer Due Diligence (CDD) is argued to be the most effective and efficient due diligence process. It is the act of assessing your customers’ background to determine their identity and the level of risk they pose. This process involves the assessment of the customer’s name, a photograph of an official document and their residential address. The reason behind this process is to eliminate any risks of conducting business with a client who may be taking part in money laundering or financing, or terrorism activities.
Different levels of Customer Due Diligence?
There are three levels of CDD, which are applied according to the size, type of client and the business it has with the client. After conducting a Customer Risk Assessment (CRA), all are determined by the risk. The three levels are (i) Simplified, (ii) Standard and (iii) Enhanced. If the customer scores a low risk, a subject person applies simplified CDD. It is the lowest level of due diligence that can be conducted on a customer. In the case of medium risk clients, in most cases, standard CDD is applied. This is because there might be a potential risk, but they are unlikely as these are realised.
On the other hand, in high-risk clients, subject persons are obliged to apply enhanced due diligence (EDD). It is an advanced KYC process that provides further risk investigation. EDD is also automatically applied if the client is a politically exposed person as their position is of greater risk.
Type of documents to be requested
The difference between the three due diligence processes is the type of documents to be requested. If subject persons are applying simplified due diligence, then the submission of an onboarding form, Politically Exposed Person and source of funds declaration forms is made along a request of identity documents. In case subject persons apply standard due diligence, the mentioned documents are requested following a company organogram, utility bill and a CV. On the other hand, EDD obliges to additionally request a proof of wealth and funds and a bank and professional reference.
Why GCS Malta?
At GCS Malta, we aim to ensure we provide high-quality service is taken. So start your journey to success with us today and contact us for more information on one or more of our services.
