Free video course
Customer Due Diligence (CDD): A Practical Compliance Guide
A practical walkthrough of customer due diligence: how the CDD process works, how compliance teams assess and monitor customer risk, and how technology and training keep programs effective against evolving financial crime.
✓ Terminology and process steps cross-checked against FATF customer due diligence guidance and standard industry practice.
Customer Due Diligence (CDD): A Practical Compliance Guide
▶ Start the courseWhat you’ll learn
- ✓ Explain the CDD process from customer identification through KYC and risk assessment
- ✓ Describe how ongoing monitoring and perpetual KYC keep customer risk ratings accurate over time
- ✓ Identify how AI and machine learning support CDD, and why human review still matters
- ✓ Recognize the main operational challenges in CDD and practical ways to address them
Before you start
- □ Basic familiarity with anti-money laundering (AML) concepts
- □ General understanding of how financial institutions onboard customers
Course curriculum
- 01 What is customer due diligence (CDD) and how does the process work? Learn what customer due diligence (CDD) is, how the KYC process works, and how compliance teams assess and categorize customer risk. CDD verifies who a customer is and assesses their financial crime risk before and during onboarding. It combines identification, KYC background checks, and a risk rating that determines how closely the relationship is monitored going forward. · CDD is preventative: it screens customers before onboarding rather than catching financial crime after the fact.· The CDD process runs from customer identification through KYC background checks to a documented risk rating.· Risk-based CDD means enhanced due diligence for high-risk and PEP customers, and lighter-touch reviews for low-risk ones. 3 min · 1 assets · checkpoint
- 02 How do ongoing monitoring and technology strengthen CDD compliance? Learn how ongoing monitoring, perpetual KYC, and AI-driven tools work together in modern customer due diligence, and why human review still matters. CDD does not end at onboarding. Ongoing monitoring, increasingly continuous through perpetual KYC, keeps risk ratings current, while AI and machine learning tools scale pattern detection, provided a human investigator still reviews and documents the final call. · Ongoing monitoring keeps a customer's risk rating accurate after onboarding, catching profile and behavior changes over time.· Perpetual KYC replaces fixed review cycles with continuous, event-triggered refreshes of customer information.· AI and machine learning tools scale pattern detection, but regulators still expect a documented human review layer on top. 4 min · 1 assets · checkpoint
- 03 What are the most common CDD challenges and how do teams overcome them? Explore the main CDD challenges compliance teams face, from data privacy and uncooperative clients to legacy technology and process efficiency. CDD faces real operational hurdles: balancing privacy law against information needs, managing uncooperative clients, replacing legacy technology, keeping teams trained against evolving typologies, and streamlining process without cutting corners. None of these are solved once; they require ongoing attention. · Data privacy laws like GDPR must be balanced against the depth of information CDD requires you to collect.· Framing CDD requests around what they protect, not just regulatory obligation, reduces client resistance.· Legacy CDD technology slows onboarding and increases operational risk; modern tools are an investment, not just a cost.· Efficiency and due diligence quality are not a strict trade-off: well-designed automation can improve both at once. 3 min · 1 assets · checkpoint
Frequently asked questions
What is the difference between CDD and KYC?
KYC, or know your customer, is typically considered part of the broader CDD process. CDD covers the full lifecycle: identifying the customer, understanding their background and purpose through KYC, assessing their risk, and monitoring the relationship on an ongoing basis. Some firms use the terms interchangeably in casual conversation, but formally KYC is one phase within CDD.
When is enhanced due diligence (EDD) required?
EDD is typically required for customers assessed as higher risk, including politically exposed persons, customers based in or transacting with high-risk jurisdictions, and relationships involving complex ownership structures. EDD adds deeper verification, more frequent reviews, and closer scrutiny of the source of funds and wealth compared to standard due diligence.
How often should customer information be reviewed after onboarding?
Review frequency should scale with risk: high-risk customers are typically reviewed at least annually, medium-risk customers every two to three years, and low-risk customers every three to five years. Firms moving toward perpetual KYC replace these fixed cycles with continuous, event-triggered reviews instead.
Can AI fully automate the CDD process?
No. AI and machine learning tools are highly effective at pattern detection and flagging anomalies at scale, but regulators still expect a documented human review layer for final risk decisions. The strongest CDD programs combine automated detection with trained investigator judgment rather than relying on technology alone.