When is CDD required?

CDD is required when establishing a new business relationship, carrying out certain occasional transactions, or when there is suspicion of money laundering or terrorist financing.

What should a robust CDD process include?

A robust CDD process typically includes identity verification, a customer risk assessment, documentation of measures and ongoing monitoring to identify unusual transactions.

Customer due diligence

Q: What does customer due diligence (CDD) mean?

Customer due diligence (CDD) is the set of measures used to verify customer identity, understand the purpose of the relationship and assess money laundering and terrorist financing risk.

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Glossary
Customer due diligence

Explained – what does customer due diligence (CDD) mean?

Customer due diligence, often shortened to CDD (Customer Due Diligence), comprises the processes a business must undertake to verify customer identities, assess risk and monitor business relationships. These requirements are set out in anti-money laundering legislation and EU directives. An AML consultant typically designs and implements CDD routines so that the business meets statutory obligations. The obligations apply to, for example, banks, law firms, estate agents and other obliged entities across Europe.

When does customer due diligence become relevant?

CDD becomes relevant when a business establishes a new business relationship, for occasional transactions exceeding defined thresholds, or whenever there is suspicion of money laundering or terrorist financing. For example, banks must always carry out CDD when opening new accounts or when unusual transactions occur.

Customer due diligence (CDD) and identity verification illustration, showing a business professional holding an ID card with a compliance checkmark on a screen for AML/KYC checks.

Points to consider for a robust CDD process

When businesses that fall under the anti-money laundering framework work with CDD, they should ensure the following aspects are in place:

Check and verify the customer’s identity using reliable, independent sources, including customer identity verification and id card verification.
Map the purpose of the relationship and the customer’s normal transaction patterns as part of the customer due diligence process.
Undertake a customer risk assessment and determine whether further measures are required under the cdd requirements.
Monitor the relationship on an ongoing basis and analyse unusual or anomalous transactions within the CDD in anti-money laundering context.
Document measures and procedures to ensure traceability and transparency within the cdd framework.
Ensure staff have adequate training on how the cdd process and the edd process should be applied to high-risk customers.

Well-executed customer due diligence creates a solid foundation for managing risk and complying with the rules in a systematic manner, helping to build trust with customers.

Customer due diligence

Why are customer due diligence (CDD) measures important?

CDD is essential to counter money laundering and terrorist financing. Without these processes, it is difficult to detect suspicious transactions and activities, and businesses risk being misused for illegal purposes. EU and national legislation across Europe therefore make CDD mandatory for multiple sectors.

A structured customer due diligence process gives businesses a clearer picture of their customers and helps to identify risk behaviours early. This strengthens internal controls and the ability to act when a transaction deviates from the norm, including when enhanced due diligence may be required.

When businesses work seriously with CDD, they signal accountability and regulatory awareness. This strengthens confidence among customers, business partners and authorities and contributes to long-term operational resilience, helping to build trust with customers.

Customer due diligence means that businesses must identify and verify their customers and understand the purpose of the business relationship; in short, the customer due diligence meaning in practice.

Businesses must conduct CDD when establishing new relationships, for larger transactions and always where there is suspicion of money laundering or terrorist financing, following the cdd requirements.

CDD sets the baseline requirements for all customers. Enhanced due diligence (EDD) applies to high-risk customers and involves a more extensive review within the edd process.

Measures to verify identity, for example passport verification or id card verification as part of customer identity verification
Address and contact details
The purpose of the business relationship
Information on the customer’s occupation or business activity to inform the customer risk assessment

CDD helps businesses detect and prevent unlawful activity, comply with anti-money laundering rules and maintain the confidence of customers and authorities through appropriate customer due diligence services.

The overall responsibility sits with management, while day-to-day work is often handled by customer-facing staff with support from compliance or AML officers and, where needed, external customer due diligence services.