Customer Due Diligence, Enhanced CDD, and Simplified CDD
The CDD building blocks
Standard CDD requires you to identify the customer, verify their identity, identify the beneficial owner, establish the nature and purpose of the relationship, and conduct ongoing CDD. Identity verification follows the Identity Verification Code of Practice - typically an official photo document plus a second source, or electronic verification of equivalent assurance.
Timing
CDD must generally be completed before the relationship is established or the occasional transaction is carried out. Limited deferral is allowed only in defined circumstances, with safeguards and completion as soon as practicable. A trap is assuming you can onboard first and verify later - that is the exception, not the rule.
Enhanced CDD (EDD)
EDD applies to higher-risk situations: politically exposed persons (PEPs), their family and close associates; correspondent banking relationships; customers in higher-risk jurisdictions; complex ownership structures; and other high-risk cases. EDD means additional identity information, senior management approval, source of funds/wealth enquiry, and enhanced ongoing monitoring.
Simplified CDD
Simplified CDD may apply where risk is demonstrably low - but you must still identify and verify the customer; you simply reduce the depth of additional measures. It is never available for suspicious customers, PEPs, or higher-risk scenarios.
Worked example
A new corporate customer is owned through a chain of three offshore companies ending in a trust. That is high risk: apply EDD, identify the ultimate beneficial owners, obtain senior sign-off, and ask for source of wealth.
Rule of thumb
Standard CDD is the default; EDD is triggered by named high-risk categories; simplified CDD requires a documented low-risk justification.