Implementing The Critical Methodology of CDD Checks in Banks

Different factors need to be considered by a business before it formulates any sort of relationship with other constituents of the global market. Examining all the safety as well as the risk factors which they could provide to the business is essential for them. With money-laundering activities prevailing in the economical world, financial firms need to closely check the real clients before they are onboarded. Identity KYC verification services will not only help businesses to reduce the rate of the possible occurrence of fraud but will also allow them to enforce a secure customer onboarding process. Therefore, the execution of the compelling steps of CDD checks will protect the data integrity of the users and will prohibit degrading the company’s reputation in any aspect. 

Rise of Various Scams in the Banking Sector

Financial organizations have seen an upsurge in the techniques of potentially obtaining money illegally, performing check frauds, credit card scams, and requesting the irregular transaction of large sums of money which pose a threat to the individual’s identity. While opening an account or operating any financial activity, due diligence in banking should be applied to perform screening checks to ensure the proper risk assessment of the client before onboarding them. There are various types of bank fraud existing in the economic world. Fraudsters can steal someone’s identity and request a loan for a big amount using their credentials. Moreover, thieves can rob a credit card and use it to purchase illegal harmful items. 

Applying the Effective Method of Customer Due Diligence In Banks 

Client due diligence is an identification process of performing background checks on individuals and checking for any probable risks associated with them. A constant ongoing monitoring assessment is also carried out to detect any fraudsters even after the customer has been onboarded. The process for implementing customer due diligence is mentioned below:

• Any illegitimate information is screened to reduce the chance of any illegal activity which could prove to be dangerous for the company. 
• Classifying the client by conducting a risk assessment to evaluate the level of risks associated with them. 
• Specifying when there is a need for an EDD check to be executed. Any low-risk individuals are dealt with under the CDD checks while someone who poses a high risk of fraud is analyzed under an advanced version of identification known as enhanced due diligence. Additional information is pulled out to examine the user closely by the process of EDD. 

The Prospective Measures to Execute the CDD Checks

• Verify identities before onboarding them: Properly review any organization, association, or client before they are linked with the business to detect any terrorist financing risks. If an entity doesn’t comply with the mandatory requirements of CDD, then companies should cease their request for account opening or any related activity. 
• Keep a record of customers: Financial institutions should keep a record of their client’s transaction activities to detect any suspicious aspect of fraud. Secondly, they should keep a check on the transaction amount and currency that the client has been allowed to use only. For precautionary measures, they should store the copies of official documents being provided at the time of identification such as driving licenses, passport information, etc. 
• Correspondence Banking: Financial firms need to perform customer due diligence measures for establishing relationships with cross-border correspondence banking firms. The continuation of the process can come to a halt if there is an involvement of shell banks.
• Wire transfers and third-party associations: Utilizing the name of someone else and they wire money to themselves. Banks should look after the lack of require original documents of the clients and respond appropriately. Information regarding the third-party involvement of the individuals is necessary to detect any fraudulent invading risks. They should also be checked against the KYC CDD AML rules.

Challenges in Executing Customer Due Diligence 

New comprehensive measures are being established for the financial institutions to follow to execute better data integrity aspects. The unavailability of the data can cause doubtful claims on the clients while carrying out the due diligence program. Many cultural issues could prevail while performing the CDD checks in underdeveloped countries as they find it hard to gather prospective data. This makes it difficult for them to identify the user before they are onboarded making them vulnerable to criminalities. Companies that are working globally can also face a challenge to determine the beneficial owners which might be located in different countries. 

Wrapping it Up

Financial organizations are always at threat of becoming a victim of fraudulent activities due to the constant involvement of money. It is subsequently better for them to identify their clients before they are onboard by utilizing the process of customer due diligence. Any fraudulent dealings conducted by a doubtful individual, business, or corporation will be eliminated by making the customer experience more secure. Ongoing monitoring will enable to specify the level of risks associated with them appropriately.