Customer Due Diligence and Know Your Customer Fundamentals

Financial institutions implement customer due diligence and know your customer processes to prevent onboarding criminals and fake accounts, verify legitimate income, monitor transactions, and report suspicious activities to authorities.

Explore customer due diligence and know your customer concepts, including high-risk customers, regulatory requirements, electronic KYC (eKYC) and fraud prevention measures, FATF and BSA guidance, and governance structures.

Download four practical checklists, aml cft, cdd kyc, edd, and internal audit, for free, to support customer due diligence practices, transaction monitoring, red flags, and suspicious activity reporting.

Customer due diligence is an ongoing process by financial institutions to identify and verify customers, understand account purpose, and monitor transactions from onboarding onward to detect suspicious activity.

Describe the customer due diligence process, including identification and verification with government issued IDs, risk assessment, and evaluating sources of income, country of residence, and account purpose.

Identify and verify corporate clients by checking licenses, registrations, beneficial ownership, ownership structure, and key management, then monitor accounts for suspicious activity and alignment with declared income.

Banks require corporate due diligence information, including registration documents, articles of association, license, registered office details, management profiles, beneficial owners, sources of funds, and financial statements for onboarding.

Learn ongoing customer due diligence and transaction monitoring after account opening, detecting and reporting suspicious activity, with vigilance for large, unexplained funds or transfers to high-risk jurisdictions, including corporate clients.

Learn how financial institutions perform customer due diligence and kyc measures at account opening, with walk-in transactions and high-risk customers, while avoiding anonymous or fake accounts.

Explore the three types of customer due diligence—simplified, standard, and enhanced—and learn when each applies, what information is required, and how high-risk customers trigger enhanced measures.

Identify risk categories for customers by reviewing a quick quiz on types of customers, including politically exposed persons, shell companies, high-risk SMEs, and low-risk established businesses.

Explore know your customer (KYC) as a core part of customer due diligence, including identification, simple/standard/enhanced due diligence, and determining ultimate beneficial owners and authorized account operators.

Ensure KYC compliance by verifying customer identity, conducting name screening against sanction lists, and adverse media checks to prevent criminals from onboarding and curb money laundering risk.

eKYC enables remote onboarding by digitally submitting documents through onboarding platforms. It automates verification, enhances compliance with AML and KYC regulations, and improves user experience.

Explore e-KYC capabilities that enable mobile biometric verification, including facial recognition and fingerprints, plus document verification APIs and blockchain-based identity checks for remote onboarding and financial inclusion.

Explore eKYC frauds, including identity theft, document forgery, and account takeover, and learn prevention measures financial institutions can adopt to protect against these schemes.

Analyze politically exposed persons screening within know your customer and customer due diligence. Utilize current pap lists and automated tools to ensure enhanced due diligence and ongoing monitoring during onboarding.

Illustrates enhanced due diligence in bank account opening, including income verification, PEP screening on PAP list and politically exposed persons list, and senior management approval with ongoing compliance monitoring.

Perform negative media screening at onboarding by searching the full name across the internet, social media, and news databases to detect potential criminal or money-launderer associations.

Explain how negative media screening informs customer due diligence and kyc fundamentals by flagging credible fraud allegations from news databases and social media, guiding banks to halt account opening.

Implement real-time screening to deny services to designated or proscribed persons. Maintain internal lists and ongoing monitoring to ensure beneficial owners and directors are not linked to such individuals.

Financial institutions screen customers against watch lists and databases to prevent dealings with designated or proscribed persons, then freeze later-identified accounts and report to the FIU and regulator.

Explain the purpose of money laundering: criminals conceal illegal money and its source, inject it into financial channels, and move funds across accounts and borders.

Criminals engage in money laundering by hiding the source of illegal funds, controlling and multiplying them, and using complex, layered transactions across accounts and channels to evade law enforcement.

Explore a money laundering scenario where funds from illegal trading flow into a real estate business, disguising illicit money as legitimate revenue through property purchases and banking deposits.

Analyze money laundering through a tax evasion scenario where an unregistered business hides profits via cash deposits in small portions, evading tax and banking scrutiny.

Explains how a restaurant chain owner launders illegal proceeds through integration, layering, placement, and consolidation with legitimate earnings, via cash deposits, new outlets, and cross-border transfers.

Learn how a comprehensive AML program aligns laws and regulations with institutional policies, enabling employees to monitor transactions, deter criminals, investigate suspicious activity, and report to regulators.

Explore key sources for anti-money laundering, customer due diligence, and know your customer, including AML acts, Fatf recommendations, national risk assessments, internal policies, sanctions lists, regulator communications, audits, and inspections.

Take a quick quiz to distinguish internal from external compliance sources for CD and KYC. Identify show cause notices, regulator regulations, and policy procedures as internal or external sources.

Identify external and internal sources of KYC compliance, including show cause notices from law enforcement or regulators, and internal policies and procedures used by financial institutions.