The concept of “buyer beware” isn’t new, it’s been around since the Roman ages.
The concept of Customer Due Diligence (CDD) in terms of money-laundering risk and “Know your Customer” was first applied in the U. S. Patriot Act in 2001.
In its essence, it involves identifying and understanding customer activities and assessing the risk of money laundering. Today, over 92 countries around the world use some form of CDD.
There’s a three-tiered CDD implemented in China that comes with more stringent checks on account based on the upper limit set on them. On accounts with higher limits, more in-depth checks are required before you can open an account.
As part of the Financial Action task Force (FATF), South Africa follows CDD checking procedures. They even implement Enhanced Due Diligence (EDD), which is mandatory for local and foreign PEPs.
With regards to anti-money laundering laws, Canada has updated its Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Authentic, valid and current documentation is accepted as a valid ID, such as government-issued ID and dual-process methods.
The Payment Service Directive for European countries calls for strict customer authentication. So two-factor authentication is the minimum standard here, and companies who don’t comply with this requirement become responsible for any losses themselves. The 2016 amendment to the due diligence requirements made simplified due diligence inapplicable in most circumstances.
Financial institutions are now required to collect and report ownership information, with four important factors relating to due diligence. These include customer identification, ownership verification, developing customer risk profiles, and ongoing monitoring.