What is Customer Due Diligence?

Customer Due Diligence (CDD) is a critical process that businesses and financial institutions undertake to verify and assess their customers’ identities, understand their financial activities, and evaluate the risks associated with serving them. It involves gathering information about customers to ensure they are who they claim to be and to detect any suspicious or potentially illegal activities. CDD is a crucial component of anti-money laundering (AML) and Know Your Customer (KYC) regulations, which aim to prevent financial crimes like money laundering and terrorist financing. By conducting thorough customer due diligence, organizations can establish trust, mitigate risks, and maintain compliance with regulatory requirements. This process typically involves collecting identification documents, verifying customer information, and assessing their financial behavior and transactions. It enables businesses to make informed decisions about engaging with customers and helps protect against potential financial crimes.

I already conduct KYC checks. What value would Neotas add?

Neotas goes beyond current and traditional KYC checks by ‘spidering out’ across the Internet, aggregating and analysing vast amounts of data at speed. We bring you additional customer data, for example through social media networks, surface and deep web sources. We provide you with a single view of risk, with insights delivered in one single place. We help you remove your blindspots and build a clearer risk profile of customers, in an easy and compliant way.

Why is it important to include open source intelligence in customer due diligence checks?

Neotas adds valuable insight from unstructured and structured sources that are currently under-utilised. The regulators are increasingly stating the importance of using open source intelligence for customer due diligence (FG 18/5, FCA). Open sources include social media, surface web and deep web data and we are specialists in ‘joining the dots’ between disparate data sources, so that you have a complete risk profile of customers.

Can Neotas be used for perpetual KYC?

Absolutely. Our Platform can be used to monitor customer risk data on an ongoing basis, without false positives. This is particularly useful as the risk profile of customers can change over time and database checks provide ‘point in time’ information, whereas our Platform monitors risk in almost real-time and consistently.

If this is quicker than traditional KYC, will it still capture as much information?

We capture more information than traditional KYC, as we aggregate and analyse data from the largest traditional databases in the world, as well as 100% of publicly available online data. The Neotas Platform interrogates data at speed and ‘joins the dots’ between disparate data sources. All the information is made available to you at the click of a button, in one single place.

How does Neotas successfully discover fraud amongst unconnected parties?

We interrogate vast amounts of information at speed and our ability to ‘connect the dots’ between disparate data sources enables us to identify risk, including fraud. We have discovered fraud amongst unconnected parties by, for instance, uncovering aliases used by individuals .

Customer Due Diligence Requirements

n the United Kingdom, regulatory bodies like the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) set forth specific guidelines governing Customer Due Diligence. These guidelines are designed to ensure that businesses operating within the financial sector uphold the highest standards of integrity and transparency. Key Customer Due Diligence Requirements Identifying and Verifying Customer Identity : This is a fundamental requirement. Businesses must obtain and verify official identification documents, such as passports, national IDs, or driver’s licenses. This establishes the customer’s true identity and is essential in preventing identity theft and fraud. Assessing the Nature of Business Activities : Understanding the scope and nature of a customer’s business operations is imperative. This involves gaining insights into the industry they operate in, the products or services they provide, and their target market. This information aids in evaluating the legitimacy and legality of their business. Verifying the Source of Funds : It is incumbent upon businesses to ascertain the legitimacy of the funds used by customers. This requires verifying that the funds have been acquired through lawful means and are not linked to illicit activities like money laundering. Conducting Risk Assessments : Evaluating the level of risk associated with a customer or business relationship is paramount. Factors such as the customer’s location, industry, transaction patterns, and any connections to politically exposed persons (PEPs) are considered. This risk assessment guides businesses in determining the appropriate level of scrutiny. Applying Enhanced Due Diligence (EDD) When Necessary : In cases where higher risks are identified, Enhanced Due Diligence (EDD) must be implemented. This involves conducting a more thorough examination of the customer’s background, financial activities, and business relationships. It provides an additional layer of protection against potential financial crimes. Adherence to Customer Due Diligence Requirements: Ensuring Compliance Meeting these requirements is not merely a legal obligation; it is a commitment to ethical and responsible business practices. Non-compliance can have severe consequences, including legal penalties, damage to reputation, and potential loss of business. Therefore, businesses must establish robust internal processes and procedures to ensure strict adherence to Customer Due Diligence requirements.

What are the 4 Customer Due Diligence Requirements?

The four main requirements for Customer Due Diligence are: Identifying and verifying the customer’s identity Understanding the nature of the customer’s business and the source of funds Assessing the risk associated with the customer and the business relationship Monitoring and reporting any unusual or suspicious activities.

What is the difference between Customer Due Diligence and Enhanced Due Diligence?

Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) are both crucial processes used by businesses, particularly in the financial sector, to assess and manage risks associated with their customers. However, they differ in their depth and scope of scrutiny: Customer Due Diligence (CDD): Purpose : CDD is a standard process used to verify the identity of customers and assess their risk level. It involves collecting basic information about the customer to ensure compliance with regulatory requirements. Scope : CDD involves verifying the customer’s identity, understanding their source of funds, and assessing the level of risk associated with the business relationship. Application : CDD is applied to all customers during the onboarding process to establish a basic level of understanding and compliance. Enhanced Due Diligence (EDD): Purpose : EDD is a more comprehensive and detailed process applied to higher-risk customers or transactions. Its primary goal is to gather additional information and conduct a deeper analysis to better understand and mitigate potential risks. Scope : EDD goes beyond CDD by involving a more in-depth examination of the customer’s background, financial activities, and business relationships. It may include gathering information on beneficial ownership, source of wealth, and additional documentation. Application : EDD is triggered by factors indicating higher risk, such as dealing with politically exposed persons (PEPs), conducting transactions in high-risk jurisdictions, or engaging in complex and unusual transactions. While both CDD and EDD aim to assess and manage risks associated with customers, EDD is a more intensive process applied to customers or transactions deemed to have a higher level of risk. It involves gathering additional information and conducting a more thorough analysis to ensure compliance with regulatory standards and to mitigate potential financial crimes.

Does finding additional fraud mean greater work to solve the problems?

There have been numerous instances where we’ve found instances of fraud where others have not found it. We pride ourselves on being able to uncover risks quickly and efficiently, which means that you can be rest assured you will solve the problems effectively.

In addition to database checks, what is the value that Neotas brings?

We provide database checks alongside the power of open source intelligence, which means we interrogate and analyse open sources (publicly available data) at speed. The additional insights from open source intelligence helps you to make decisions more effectively. This gives you peace of mind that your blind spots are covered.

If I’m a member of a junior analyst team, how will the Neotas Platform help me conduct investigations?

The Neotas Platform will help you conduct your investigations more effectively and efficiently, saving you at least 25% of your time. The Platform provides a richer and more complete profile of customers with greater: Speed and ease of use: our Platform can conduct ‘built-in’ investigations in seconds as opposed to days and hours. The Platform is also easy to use. Coverage: we cover traditional third party databases, the entire internet (surface, deep and dark web), bringing them all together in a single view. Depth: we automatically gather and analyse data using AI and machine learning, pulling information which others do not. This provides unique insights into behavioural attributes, reputation and connections that are not in any databases.

How are you different to entity resolution?

We focus on the live data that exists outside of banks or financial institutions. This data comes in many forms, including social media, customer/employee reviews, adverse media, surface web and deep web sources, etc. We give you clear risk insights by analysing this data at speed and bringing it all together in one place.

I use a lot of third party providers, which is difficult and time consuming. How can Neotas help solve this problem?

Our Platform ‘joins the dots’ between disparate data sources, including your existing third party providers, which are integrated into one central hub. We provide you with a single view of all risks uncovered, helping you to make your processes more effective and efficient.

Customer Due Diligence

A Customer Due Diligence (CDD) checklist is a crucial tool for businesses to ensure compliance and mitigate financial risks. It encompasses verifying customer identities, assessing their risk profiles, and monitoring for suspicious activities. Key components include identity and address verification, understanding business activities, confirming the source of funds, conducting risk assessments, and applying Enhanced Due Diligence (EDD) when necessary. Ongoing monitoring procedures and meticulous record-keeping further fortify the CDD process. By adhering to this checklist, businesses demonstrate a commitment to ethical and responsible practices while safeguarding against money laundering, fraud, and other financial crimes.

Customer Due Diligence (CDD):
- Purpose: CDD is a standard process used to verify the identity of customers and assess their risk level. It involves collecting basic information about the customer to ensure compliance with regulatory requirements.
- Scope: CDD involves verifying the customer’s identity, understanding their source of funds, and assessing the level of risk associated with the business relationship.
- Application: CDD is applied to all customers during the onboarding process to establish a basic level of understanding and compliance.
Enhanced Due Diligence (EDD):
- Purpose: EDD is a more comprehensive and detailed process applied to higher-risk customers or transactions. Its primary goal is to gather additional information and conduct a deeper analysis to better understand and mitigate potential risks.
- Scope: EDD goes beyond CDD by involving a more in-depth examination of the customer’s background, financial activities, and business relationships. It may include gathering information on beneficial ownership, source of wealth, and additional documentation.
- Application: EDD is triggered by factors indicating higher risk, such as dealing with politically exposed persons (PEPs), conducting transactions in high-risk jurisdictions, or engaging in complex and unusual transactions.

While both CDD and EDD aim to assess and manage risks associated with customers, EDD is a more intensive process applied to customers or transactions deemed to have a higher level of risk. It involves gathering additional information and conducting a more thorough analysis to ensure compliance with regulatory standards and to mitigate potential financial crimes.

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Customer Due Diligence

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