Customer Due Diligence and Enhanced Due Diligence
This domain tests the timing, content, and escalation of customer due diligence and enhanced due diligence in Korean financial institutions. CDD is not a one-time account-opening formality; it is an ongoing risk-based process that supports STRs, sanctions screening, and beneficial ownership work.
Core rules
- Identify the customer and verify identity using reliable, independent sources before establishing the relationship or carrying out an occasional transaction above the applicable threshold.
- Identify the beneficial owner, understand the purpose and intended nature of the relationship, and conduct ongoing monitoring.
- EDD triggers include high-risk jurisdictions, PEPs, complex ownership structures, unusual transaction patterns, and non-face-to-face onboarding.
- EDD measures include additional identity information, source of funds and source of wealth, senior management approval, and more frequent monitoring.
- Simplified due diligence may be allowed only for lower-risk situations and never where suspicion exists.
Worked example
A prospective corporate customer is owned by a Hong Kong holding company, which is in turn owned by a BVI entity. The bank cannot stop at the director who signs the account opening form. It should look through the structure, identify natural persons with 25% or more ownership or control, verify their identities, assess the jurisdiction risk, and obtain source-of-wealth evidence before onboarding.
Traps
A passport copy is verification, not full CDD. Do not apply simplified measures to a PEP or a high-risk country. Do not assume CDD is complete because the customer passed sanctions screening; sanctions and CDD are separate controls.