What is the primary goal of the Customer Due Diligence (CDD) process?

The primary goal of the Customer Due Diligence (CDD) process is to understand a customer's risk profile. CDD is a crucial aspect of anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. By assessing the risk associated with a customer, financial institutions can identify potential risks related to money laundering or terrorist financing activities.

Understanding a customer's risk profile involves collecting and analyzing relevant information, such as the customer's identity, business activities, and transaction patterns. This helps institutions to make informed decisions about which customers may require enhanced due diligence and monitoring to mitigate risks effectively.

The focus on understanding a customer's risk profile is fundamental to ensuring compliance with regulatory requirements and maintaining the integrity of the financial system. It allows institutions to detect unusual or suspicious behaviors that may indicate illicit activities, thus contributing to the overall efforts to combat money laundering and financial crimes.