Customers due diligence (CDD) measures are a key part of the anti-money laundering requirements. They ensure that businesses know who their clients are, ensure that they do not accept clients unknowingly which are outside their normal risk tolerance, or whose business they will not understand with sufficient clarity to be able to form money laundering suspicions when appropriate.
If a business does not understand its client’s regular business pattern of activity it will be very difficult to identify any abnormal business patterns or activities. In addition businesses must supply the identities to SOCA if required.
Some criminals deliberately misrepresent their identity to help commit crime making detection harder.
The criminal will use 3 main methods to disguise his identity
- Modification of their own identity
- Creation of a fictitious one, or
- Steal someone else’s
They may use a range of ‘false documents’ in support of this
- Forged – genuine but altered in some way e.g. Photo
- ‘Counterfeit’ documents – no part is genuine or
- Fraudulently obtained genuine documents
Many businesses will have other procedures for client acceptance, for example to ensure compliance with professional requirements for independence and to avoid conflicts of interest. The requirements of the 2007 Regulations may either be integrated with those procedures or addressed separately. In either case, initial customer due diligence information not only assists in acceptance decisions, but also enables the business to form well-grounded expectations of the client’s behaviour which provides some assistance in detecting potentially suspicious behaviour during the business relationship.
The processes required for compliance with anti-money laundering initial customer due diligence requirements contribute vitally to the overall picture of potential clients and appropriate risk assessment of them. However, a lack of concern raised during customer due diligence does not automatically mean that the client and engagement will remain in their initial risk category. Continued alertness for changes in the nature or ownership of the client, its business model, or its susceptibility to money laundering – or actual evidence of the latter – must be maintained.