Which key elements should be included in CDD?

Customer Due Diligence (CDD) is the foundational process for understanding a customer's risk profile. The key elements form a comprehensive picture for risk assessment. This includes a customer overview (identity verification), understanding the nature of business or occupation to establish the purpose of the relationship and expected activity, and assessing the geographic profile for jurisdictional risk. A summary of red flags is the direct result of analyzing these elements to identify potential indicators of illicit financial activity, which is a core objective of the CDD process.

A. This option includes elements more appropriate for Enhanced Due Diligence (EDD), such as court records and extensive open-source intelligence, which are not standard for all customers.
C. This option incorrectly lists the institution's internal policies (risk appetite) and the outcome of the CDD process (risk assessment statement) as elements within the CDD itself.
D. This option mixes a core element (customer type) with data from ongoing monitoring (activity totals) and comparative analysis tools (peer summary), which are not initial CDD components.

1. ACAMS CKYCA Study Guide, Chapter 2: Customer Due Diligence (CDD). This chapter outlines the essential components of a CDD program, emphasizing the need to collect information to understand the customer, their business or occupation, their location, and the purpose of the account to build a comprehensive risk profile. It explicitly details how this information is used to identify red flags.

2. Financial Action Task Force (FATF). (2012-2023). International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation – The FATF Recommendations. FATF, Paris, France. Recommendation 10 and its Interpretive Note detail the required CDD measures, which include: (a) identifying the customer, (b) identifying the beneficial owner, and (c) understanding the purpose and intended nature of the business relationship. These directly correspond to the elements of customer overview and nature of business. Geographic risk is a key factor in applying a risk-based approach as described throughout the FATF standards.