What is Customer Due Diligence (CDD)?

Customer Due Diligence (CDD) is the process of verifying who your clients are, understanding what they're doing, and assessing their money laundering risk before you work with them. It's legally required under Australian AML/CTF laws and involves collecting ID documents, verifying their identity, understanding their business purpose, and monitoring their transactions. Think of it as "know your customer" - you can't provide services to someone you haven't properly identified and assessed.

Based on the risk of the client and your AML/CTF program you may apply different types of CDD.

Standard CDD (Most Common)

For: Regular, low-risk clients with straightforward transactions

What you do:

Collect acceptable identification documents
Verify the person is who they claim to be
Understand the nature of their business with you
Assess their money laundering risk
Monitor transactions for unusual activity

Example: A first-home buyer purchasing a $700,000 house with a bank mortgage. Standard ID check, straightforward transaction, clear purpose.

Enhanced Due Diligence (EDD) (High-Risk)

For: Higher-risk clients, transactions, or situations

When required:

Politically exposed persons (PEPs)
Clients from high-risk countries
Complex ownership structures
Large cash transactions
Suspicious circumstances
Clients who are reluctant to provide information
Unusual transaction patterns

What you do (in addition to standard CDD):

More rigorous identity verification
Source of wealth verification (how they accumulated assets overall)
Source of funds verification (where this specific money comes from)
Enhanced ongoing monitoring
Senior management approval
More frequent reviews

Example: A foreign government official buying a $5M property through an offshore company with cash. You need to verify their identity, understand their legitimate wealth sources, confirm where this specific $5M came from, get senior approval, and keep monitoring.