CDD (Customer Due Diligence) and KYC (Know Your Customer) are two important processes in the field of compliance, particularly in banking and financial services. While they are related and overlap to some extent, there are some key differences between the two.
CDD refers to the process of verifying the identity of a customer and assessing the risks associated with doing business with them. It involves collecting and analyzing information about the customer’s identity, occupation, source of funds, and other relevant details. The purpose of CDD is to prevent money laundering, terrorist financing, and other financial crimes by identifying high-risk customers and monitoring their transactions.
KYC, on the other hand, is a broader term that includes CDD as well as other aspects of the customer relationship. In addition to verifying the customer’s identity and assessing their risk level, KYC also involves understanding the customer’s financial needs, goals, and preferences. The goal of KYC is to build a strong relationship with the customer based on trust and mutual understanding.
In summary, CDD is a specific process within the broader context of KYC. While both are important in compliance, CDD focuses more on risk assessment and mitigation, while KYC involves building a strong relationship with the customer.