Customer Due Diligence Concerns? A 5-Step Checklist Fix

With regulatory environments becoming increasingly complex, banks have a responsibility to deliver a Customer Identification Program (CIP) and Customer Due Diligence (CDD). These processes are seen as a minimum requirement that financial institutions can’t afford to neglect.

FinTech Weekly
Nov 21, 2018 · 4 min read

by Adrian Black, Chief Executive Officer, NorthRow

According to Forbes, banks are “the gatekeepers of the financial system” and with this title comes a fair amount of associated responsibility.

Know Your Customer (KYC) and Anti-Money Laundering (AML) checks are conducted primarily to combat financial crime. However, the rise in technology use and cross-border transactions have made traditional systems used to complete this ineffective.

Recent reports have highlighted the difficulties that the majority of financial institutions are facing with the changing climate, leading them to increasingly turn to technological solutions to help address these challenges.

Common Concerns

Maintaining customer due diligence can be costly, with some banks spending over $500 million annually on their efforts to remain compliant. However, the increased risk of fraud in the financial sector makes this an integral process. Banks must invest and act in an appropriate manner, but the area is worryingly complex. This often leads banks confused as to when and how they should act.

The extent of CDD responsibility stems further and is shared by more than one party. Beneficial owners, those who own 25 percent or more of an entity, are also under scrutiny and must remain compliant.

This means that banks need to conduct consistent, comprehensive checks to protect their integrity.

The 5-Step Checklist Fix for KYC

As we’ve seen, complying with changing regulations and acting in accordance with KYC best practices can be challenging. But, our Five-Step Checklist has you covered.

Step 1: Be Prepared

Prior to opening an account, you should perform an initial check to detect any potential issues up front. This doesn’t have to be a long-winded process. Simply gaining access to documentation that confirms a client’s identity and location will give you some early signals.

Step 2: Use Accredited Third Parties

Despite the use of lawyers, auditors or other third-party organisations that might assist in your customer due diligence process, the sole responsibility of CDD lies with you. To protect your liability, ensure you select to work with third parties which align with your practices, values and processes.

Step 3: Maintain Safe Documentation

Obtaining the correct data is half of the battle. Making sure you have an updated, protected digital record of your checks will remove any potential risk to your business. Make sure the information is stored securely and is easily accessible for those with permission.

Step 4: Undertake Enhanced Due Diligence

Classifying your checks and taking secondary action is sometimes necessary. An enhanced due diligence process may be suitable for some clients, depending on the level of risk. Conducting periodic CDD checks can help you keep track of higher risk transactions from disparate locations, consisting of different methods and currency types.

Step 5: Retain Records

As well as storing current records securely, make sure you have a catalogue of your previous CDD history. This data can be referred to when dealing with clients over a lengthy period. These may also need to be reviewed if regulations change in the future — as they are liable to do.

The Solution

The emergence of a decentralised economy is rapidly changing the banking sector.

In the US alone, the US Treasury estimates that over 300 billion dollars worth of illicit activity occurs annually.

The need for extensive, improved customer due diligence processes, enhanced by partnerships with tech solution brands is necessary.

Fintech firms can now automate compliance checks. Financial institutions benefit by avoiding rising fines and remaining compliant. In the long run, this will allow banks to focus on their core business areas.

If you want to find out more about a managed service for enhanced Customer Due Diligence — watch the video below.


An innovative CEO with over 30 years’ software industry experience, Adrian has occupied multiple senior positions with leading UK corporates. He has also undertaken strategic consultancy roles with global companies including Experian, eBay and Autotrader. Driven by his passion for and expertise in fraud detection, data and intelligence sharing, Adrian founded NorthRow (formerly Contego) in 2010 to enable organisations to combat fraud and financial crime.


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Fintech Weekly Magazine

Insights into where finance meets technology - from experts, for experts.

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