Which of the following is a method for conducting Customer Due Diligence (CDD)?

Conducting Customer Due Diligence (CDD) is a crucial component of a financial institution's process for identifying and understanding its customers and their financial activities. Assessing customer transaction history is a primary method used in CDD as it helps institutions to build a profile of the customer's typical behavior, allowing them to identify any suspicious activity or unusual patterns that may indicate money laundering or financial crime.

By reviewing transaction history, institutions can verify the legitimacy of the customer's source of funds and ensure that their activities align with the customer’s known profile and risk level. This ongoing monitoring is vital for meeting regulatory requirements and enhancing the overall effectiveness of anti-money laundering (AML) programs.

Other options listed do not align directly with the primary objectives of CDD. Focusing solely on profit margins does not provide insight into customer risk or the nature of their financial activities. Implementing random audits, while valuable for compliance and risk assessment, does not serve as a reliable method for understanding individual customer relationships on a continuous basis. Evaluating employee performance is important for organizational efficiency but has no direct relevance to the processes involved in CDD.