Customer Due Diligence Flashcards
What is meant by Customer Due Diligence (CDD) ?
The process of evaluating a prospective business decision by investigating relevant financial, legal and other important information about the other party.
What approach must be taken by an accountancy firm to CDD?
A risk-based approach.
Give a few examples of where an accountant should carry out CDD.
When the accountant establishes a business relationship with a client.
When the accountant suspects money laundering or terrorist financing
When there is doubt about a client’s identification information.
What must an accountant do to carry out sufficient CDD?
They must have a detailed look at the client and the way it operates, to decide whether they can be in a professional relationship, that there are no ethical issues or money laundering risks
What should an accountant include in a CDD report?
Verifying the client’s identity, through looking at information from a reliable source.
Ensure they understand the beneficial owners, if the person who owns the business is not the person who runs it.
What the client wants from the relationship, or the purpose and nature of the transaction.
What should records of CDD carried out include?
Copies, or reference to, the CDD evidence that was used to verify the client’s identity.
Copies or originals of documents relating to transactions that have been subject to CDD, i.e. an invoice supporting a client receipt of a large cash payment from a customer.
How long must both records of CDD be kept for?
Five years.
