customer due diligence (cdd)
Proper care of the customer (Customer Due Diligence, CDD) is a procedure used by financial institutions, including companies related to the cryptocurrency market, aimed at identifying and verifying the identities of customers, as well as assessing the risk associated with transactions. CDD is an integral part of the anti-money laundering (AML) and combating the financing of terrorism (CFT) system, which are priorities for financial institutions worldwide.
WHY IS CUSTOMER DUE DILIGENCE (CDD) IMPORTANT IN THE CONTEXT OF CRYPTOCURRENCIES?
In the case of the cryptocurrency market, where transactions are usually carried out online and anonymity can be more easily achieved, customer due diligence plays a crucial role in preventing financial abuses. Through the CDD process, financial institutions can effectively monitor their customers, identify suspicious activities, and minimize the risks associated with money laundering and terrorism financing in the cryptocurrency space.
WHAT INFORMATION DOES THE CUSTOMER DUE DILIGENCE (CDD) PROCESS INCLUDE?
The CDD process involves collecting various information about the customer, such as personal data, transaction purposes, source of funds, and risk profile. It is also essential to check whether the customer is not on international sanctions lists and is not associated with known financial criminals. Depending on the level of risk, financial institutions may also require documents confirming the customer’s identity.
HOW IS THE CUSTOMER DUE DILIGENCE PROCESS CONCLUDED?
The CDD procedure can be completed after successfully verifying the customer’s identity and assessing the risk associated with the transactions. In case of suspicions of irregularities or high risk, financial institutions may decide to report such transactions to the relevant regulatory authorities. Regardless, CDD should be a continuous process of monitoring and updating customer information.
In conclusion, proper care of the customer (CDD) plays a crucial role in preventing financial abuses related to the cryptocurrency market. Through effective identification of customer identities and risk assessment, financial institutions can operate in accordance with applicable legal regulations and international financial security standards.