What is CDD / SDD / EDD in Banking? 🕵
Before we go into detail, let’s understand
What is Due Diligence?
Due diligence is a process or effort to collect and analyse information about your customer before making a decision or conducting a transaction so that the reporting entity is not held legally liable for any loss or damage.
What is a reporting entity — I covered that in detail in my last post. I will leave the link below in the comments.
What is KYC?
KYC stands for Know Your Customer.
The process of obtaining information about your customers is part of the identification process.
Companies and other financial institutions usually carry out the KYC
process when opening accounts.
Now coming to our main topic points:
CDD stands for Customer Due Diligence.
Customer Due Diligence is a KYC process of doing background checks on your customer to assess their risk before dealing with them.
Key checks include:
Financial Crime
Credit Worthiness
Involvement in money laundering or terror financing.
SDD stands for Simplified Due Diligence.
The lowest level of due diligence is called simplified due diligence.
This is appropriate where there is little or no risk of your customer becoming involved in money laundering or terrorist financing.
Such as listed entities that have already come in a preview of external and market scrutiny.
EDD stands for Enhanced Due Diligence.
Enhanced Due Diligence gives a higher level of scrutiny to potential business partnerships, with the main objective is to highlight risks that can’t be detected by Customer Due Diligence.
It can be used as an extension of the CDD.
Follow Shivendra Bhatia for more articles on FinTech/RegTech.
Namaste 🙏
SEE YOU NEXT TIME
You can let me know on LinkedIn! 🥳
