CDDCustomer Due Diligence
The obligation to identify and verify customers and their beneficial owners, understand the purpose and intended nature of the relationship, assess the customer's risk, and monitor the relationship on an ongoing basis. Enhanced Due Diligence (EDD) applies to higher-risk situations, such as politically exposed persons (PEPs), high-risk jurisdictions and complex or opaque ownership structures.
Why it matters
CDD is required by FATF Recommendation 10 and by national law in nearly every jurisdiction. In the US, FinCEN's CDD Rule, in force since May 2018, requires covered institutions to identify the beneficial owners of legal entity customers and to keep customer information current. In the EU, the Anti-Money Laundering Regulation (AMLR) will replace national CDD rules with a single rulebook from 10 July 2027.
In practice, CDD sets each customer's risk rating, which then drives monitoring thresholds, review frequency and whether EDD is needed. Static reviews done only at onboarding tend to miss change, so regulators expect the risk profile to be updated when behavior shifts.
This is where perpetual, data-driven customer risk scoring helps: actual transaction behavior can be compared with the expected profile captured at onboarding, and material differences can trigger a refresh.
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