Know Your Customer (KYC) & Customer Due Diligence (CDD) are similar, but there are some differences. The first enables a company to build a risk profile for a client by retrieving the customer's data prior to beginning a business relationship. The CDD, on the other hand, specifies whether a customer's information is right or wrong. History and ultimate utility ownership tests are also needed by CDD. Past KYC controls have Customer Due Diligence.
Customer Due Diligence is a type of inventory that allows you to "Know Your Customer." Customers' knowledge is checked by KYC, which helps the CDD. Previous KYC transactions have now been transformed into Customer Due Diligence applications. Previously, the KYC procedure was ineffective at stopping crime. As a result, software was created to automate the entire operation. Many financial institutions and other organizations have benefited from this. This software method makes it simple to perform both real-time and routine tests. Since a customer's risk profile may change over time, the Customer Due Diligence process must be continued throughout the business relationship.
Apart from the focus on funding, the key difference between KYC and CDD is that CDD controls are carried out in a phase, and contact with the customer continues. From beginning to end. The CDD offers a quality assurance system, which is particularly useful for businesses that deal with a lot of transactions on a daily basis, such as banks and real estate. They employ sophisticated software designed to monitor fund transfers and identify suspicious circumstances, or "red flags." As a result, the CDD continues to do a good job with KYC from the beginning to the end of the customer relationship and stakeholder operation, assuring that the organization's processes are not being used to launder money.
As a result, the CDD is an essential component of the AML programme and is audited on a regular basis, including transaction volume, dollar amount, and regional distribution. However, as a cautionary note, software systems must be reviewed and updated on a regular basis in order to produce results. The "daily intervals" at which monitoring is replicated for each system vary depending on the design and complexity of automated systems' controls. They can change on a daily or annual basis.