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Customer Due Diligence (CDD) Explained – 2025 Beginner Guide
Customer Due Diligence (CDD) is one of the most important steps in KYC and AML. It helps financial institutions understand who their customers are, assess their risk level, and monitor them appropriately.
This simple 2025 guide explains what CDD is, why it matters, what documents are needed, red flags, types of CDD, and real-world examples — perfect for beginners and job seekers.
Short answer:
CDD is the process of identifying a customer, verifying documents, assessing their risk, and monitoring their activities.
What Is Customer Due Diligence (CDD)?
CDD is the process of performing identity checks, reviewing documents, understanding customer background, and determining the level of financial crime risk they pose.
CDD is applied to every customer — individuals, corporates, and beneficial owners.
Why Is CDD Important?
- Prevents identity fraud
- Detects money laundering risks early
- Ensures compliance with global AML laws
- Supports risk-based monitoring
- Protects institutions from penalties
Types of CDD (2025)
- SDD – Simplified Due Diligence: For low-risk customers
- CDD – Standard Due Diligence: For normal customers
- EDD – Enhanced Due Diligence: For high-risk customers
CDD Process – Step-by-Step (Simple)
- Collect customer information
- Verify identity documents (KYC)
- Verify address
- Screen for sanctions, PEP, adverse media
- Understand customer background & occupation
- Assess customer risk level
- Decide: SDD, CDD, or EDD
- Monitor customer transactions
Documents Required for CDD (2025)
- Passport / government ID
- Proof of address
- Date of birth & nationality
- Business registration documents (for corporates)
- Ownership structure (for corporates)
- UBO identification
- Tax ID or registration number
CDD Red Flags (2025)
- Information mismatch or inconsistent documents
- Customer unwilling to provide details
- Unexplained source of wealth
- High-risk countries
- PEP involvement
- Negative news during screening
- Complex ownership structures with no clear purpose
Simple CDD Examples (Beginner Friendly)
Example 1 – New individual customer
Customer submits passport + utility bill + employment information → CDD completed.
Example 2 – Small business opening account
Business registration + ownership documents + proof of address → CDD completed after beneficial owner identification.
Example 3 – Customer with minor adverse media
Old civil dispute found → risk adjusted slightly → standard CDD with monitoring.
Frequently Asked Questions (FAQ)
Is CDD mandatory?
Yes — every customer must undergo CDD as part of AML regulations.
Are CDD and KYC the same?
No. KYC is part of CDD. CDD is a broader process including risk assessment and monitoring.
Do corporates also undergo CDD?
Yes — including UBO verification, business understanding, and ownership assessments.
Want Real-World CDD Training?
Learn CDD, EDD, SoF/SoW, sanctions, screening, and investigations inside GO-AKS KYC Certification, G-CAMO, and G-CAMI.
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