What is a primary function of customer due diligence in AML practices?

The primary function of customer due diligence (CDD) in anti-money laundering (AML) practices is focused on verifying customer identities and assessing risks associated with those customers. CDD is a critical component of an organization's compliance program and serves several important purposes. It helps institutions understand the nature of their customers and the potential risks they might pose in terms of money laundering or terrorist financing.

This process includes collecting essential information, such as the customer's name, address, date of birth, and, in some cases, business information for entity customers. After verifying identities, organizations conduct a risk assessment to categorize customers according to their risk levels, which informs the degree of monitoring and controls that may need to be applied to their transactions.

While the other options touch on issues related to customer interactions and transaction management, they do not accurately reflect the main purpose of CDD. Eliminating all customer risks is unattainable; compliance with advertising laws is outside the scope of AML; and although shortening transaction processing times could be a benefit of streamlined procedures, it is not a core function of CDD. Thus, identifying and mitigating risks through customer verification is the correct focus of CDD in the AML framework.