What is KYC, EDD, CDD ?

Question

Accepted Answer

KYC stands for Know Your Customer, EDD stands for Enhanced Due Diligence, and CDD stands for Customer Due Diligence.

KYC is the process of verifying the identity of a customer to prevent fraud and money laundering.
EDD is a more thorough version of KYC that involves additional checks for high-risk customers.
CDD is the process of assessing the risk of a customer and determining the appropriate level of due diligence.
Examples of KYC include verifying a customer's identity through government-issued ID or utility bills.
Examples of EDD include conducting background checks on customers with high-risk profiles, such as politically exposed persons.
Examples of CDD include determining the source of a customer's funds and assessing their risk level based on their occupation or country of origin.

Accepted Answer

KYC, EDD, and CDD are acronyms commonly used in the context of compliance and risk management, particularly in the financial industry. Here's what they stand for:

1. KYC: Know Your Customer

KYC refers to the process of verifying and identifying the identity of customers. It is a standard procedure that financial institutions and other regulated entities follow to ensure that they have sufficient information about their customers' identity, occupation, and source of funds. KYC helps prevent money laundering, fraud, and other illicit activities by establishing the identity and credibility of customers.

2. EDD: Enhanced Due Diligence

EDD is a more comprehensive and rigorous level of due diligence that is conducted on customers or entities posing a higher risk. It involves gathering additional information and conducting a more thorough analysis of potential risks associated with a particular customer or business relationship. EDD is typically applied to customers who have a higher risk profile, such as politically exposed persons (PEPs), high net worth individuals, or customers from high-risk jurisdictions.

3. CDD: Customer Due Diligence

CDD refers to the process of gathering and verifying basic information about a customer to establish their identity and assess the level of risk they pose. It involves verifying the customer's identity through reliable and independent documents or information sources. CDD measures help in assessing the suitability of the customer for the financial institution's products or services and detecting any potential money laundering or terrorist financing activities.

In summary, KYC, EDD, and CDD are different levels of due diligence processes implemented by financial institutions and regulated entities to mitigate the risks associated with money laundering, fraud, and other financial crimes.

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