This article provides guidance on the key CDD steps that businesses in the DNFBP domain must follow.

1. Know Your Customer (KYC)

KYC is the first and fundamental step of the CDD process. It involves:

• Identifying and verifying the customer’s identity as well as the Ultimate Beneficial Owner (UBO).
• Collecting personal and business information, including job title, source of funds, type of business, and geographical location.
• Validating this information using trustworthy, independent, and disinterested sources and tools.

2. Name Screening

To ensure customers do not pose a risk to the business, name screening must be conducted against relevant databases:

• Cross-checking customer names against local and global sanctions lists.
• Identifying politically exposed persons (PEPs) and their close associates or family members.
• Searching for adverse media coverage or any negative public information linked to the customer.

Name screening must be performed at onboarding and continuously throughout the business relationship to ensure timely risk mitigation.

3. Customer Risk Assessment

Once the customer identity and initial screening are complete, DNFBPs must assign a risk rating to the customer based on various factors such as customer profile, country of origin, type of business, transaction behavior, and delivery channels. The levels include:

• Low Risk: Basic due diligence measures are sufficient.
• Medium Risk: May require additional verification and periodic reviews.
• High Risk: Must undergo Enhanced Due Diligence (EDD).

4. Enhanced Due Diligence (EDD)

For high-risk customers, DNFBPs must apply EDD procedures to better understand and mitigate potential threats. This includes:

• Requesting additional documents and conducting deeper background checks.
• Verifying the source of funds and wealth.
• Applying a higher level of transaction monitoring and scrutiny on the customer’s activities.

5. Ongoing Monitoring

CDD is not a one-time process. DNFBPs must implement an ongoing monitoring framework to continuously assess customer behavior and detect any unusual or suspicious activities. This involves:

• Regularly checking and updating customer profiles and risk ratings.
• Monitoring transactions in real-time to identify anomalies or red flags.
• Triggering alerts and conducting reviews when thresholds are met or suspicious behavior is detected.
• Ensuring timely reporting of suspicious activities to the Financial Intelligence Unit (FIU) or other relevant authorities, as required by local regulations.

How Finch Innovate Can Help DNFBPs Stay Compliant

 

Finch Innovate provides AI-powered AML compliance solutions which can be tailored as per the specific industry requirements. Our solutions support DNFBPs in streamlining their compliance efforts by offering:

• Real-time name screening across global and local watchlists, PEP databases, and adverse media sources.
• Automated KYC process for customer onboarding and risk assessments, reducing manual workload and human error.
• Real-time and post transaction monitoring tools that identify suspicious behavior and patterns instantly through machine learning and behavioral analysis.
• Ongoing monitoring and alert management, ensuring you stay updated on customer risk over time.
• Automated reporting tools, including suspicious activity report (SAR), suspicious transaction report (STR) and audit reports.

Whether you are a financial institution or a DNFBP, Finch Innovate’s solutions help you meet your AML/CFT obligations seamlessly with an onshore development and support team.

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