Customer due diligence (CDD) is a process of gathering and verifying information about customers to assess their potential risks and ensure compliance with regulations. This process involves collecting data to confirm the customer’s identity to prevent various types of illegal activities, including -but not limited to- identity theft and money laundering. Thanks to Customer Due Diligence, companies can identify customers’ unusual behavior and predict future transactions they will likely engage in.
By conducting due diligence, companies can protect themselves from potential losses, legal and reputational risks, and regulatory penalties by identifying potential risks associated with a customer and taking appropriate measures to manage them. CDD can also help businesses build customer trust and increase overall customer satisfaction.
In 2019, the Financial Crimes Enforcement Network (FinCEN) issued a report stating that real estate transactions are a significant vulnerability for money laundering. CDD can help to identify customers who may be using real estate transactions to launder money. Source
In 2020, German payments company Wirecard collapsed after it was discovered that €1.9 billion was missing from its accounts. Investigators later found that Wirecard had not properly verified the identity of some of its customers, which allowed fraudulent transactions to take place. Source
In 2020, the US Securities and Exchange Commission (SEC) fined a broker-dealer $15 million for failing to file Suspicious Activity Reports (SARs) on hundreds of transactions that showed red flags for potential money laundering. Source
In 2016, a terrorist attack took place in Brussels, Belgium, which killed 32 people and injured hundreds more. Investigators later discovered that the terrorists had used prepaid cards to finance the attack. The prepaid cards were purchased without proper CDD measures, which allowed the terrorists to remain anonymous and avoid detection. Source
Customer due diligence typically involves identification, verification, risk assessment, and ongoing monitoring.
1. Identification
First, the customer’s identity is established through the collection of Proof of Identity documents: passports, driving licenses, nationally issued IDs, and Proof of Address documents such as utility bills, bank statements, and government-issued correspondence.
2. Verification
Next, provided information is verified through various security checks. In Fully-Verified, we combine AI technology and the knowledge of our verification specialists to ensure the highest security level.
3. Risk assessment
The risk associated with the customer is then assessed based on factors such as their business activities, country of origin, and financial profile.
4. Ongoing monitoring
Finally, ongoing monitoring ensures that customer risk profile changes are detected and addressed.
Customer Due Diligence is essential for businesses to manage risks associated with their customers. By collecting and verifying information, assessing risk, and monitoring ongoing activities, businesses can protect themselves and build trust with their customers. Implementing effective CDD procedures is critical to a company’s risk management strategy.
Streamline your onboarding processes.
Experience unparalleled automation.
Eliminate identity fraud
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Fully-Verified offers a wide range of fully customizable verification services tailored to your needs. Our CDD procedures, based on combining the human verification specialist and the help of technology (AI, Face Recognition) provide the highest security level.
Our solutions include:
Self-verify – a secure, automated verification for onboarding new users. First, our system guides the user through the verification and records the whole process so that a trained specialist can double-check it.
Auto-Verify – a fast and simple to follow, fully automated verification process in which the user takes the required pictures and submits them for review.
Live-Verify – a live video call with a verification specialist (trained in document knowledge, body language, and areas of criminal psychology) backed by automated security checks (using face recognition technology and other types of AI).
Streamline your onboarding processes. Experience unparalleled automation.
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Fully-Verified was created as answer to its founders collectively losing over $150 000 to various types of fraud in their eCommerce businesses.
