Knowing who your customers are is one of the best ways to protect your business from financial crime. It means more than collecting identity documents. It's about understanding who you're doing business with and having confidence that they are who they claim to be.
This is known as know your customer (KYC), which involves:
- identifying your customers
- checking their identity
- understanding who may be acting on their behalf
- understanding any risks they may present.
When you know your customers, it’s harder for criminals to misuse your business to move or hide proceeds of crime.
One of the main ways you do this is through customer due diligence (CDD).
What is customer due diligence
CDD involves collecting and verifying information to understand your customers and manage money laundering and terrorism financing risks. It helps you understand who a customer is and determine whether additional checks or monitoring may be needed.
Effective CDD can help you:
- verify a customer's identity
- understand who owns or controls a company, trust or other entity
- assess customer risk
- identify unusual or suspicious activity
- meet your AML/CTF obligations.
The better you know your customers, the easier it is to manage risk and apply the right checks when needed.
Why customers might be asked for ID
Providing ID is a common part of CDD. You may ask customers for ID when opening an account, starting a service or completing certain transactions.
You may also need to request additional information, such as the purpose of the transaction or source of funds. While these checks may take extra time, they play an important role in preventing financial crime.
You can direct your customer to our website for more information on why they might be asked for ID.
Take a risk-based approach
Not all customers present the same level of risk. The checks you apply should reflect the:
- products or services you provide
- nature and circumstances of the customer
- purpose of the business relationship
- any factors that may increase the risk.
Some customers may require additional verification or monitoring, while others present a lower level of risk.
Taking a risk-based approach helps you direct your time and resources towards the areas of greatest risk.
Customer due diligence is an ongoing process
CDD doesn't stop once a customer is onboarded.
A customer’s circumstances, business activities and risk profile can change over time. You should review and update customer information when needed so you can identify changes and respond appropriately.
Keeping customer information current supports stronger compliance and better risk management.
Resources to help
We provide a range of resources to support you with customer due diligence, including: