If you work in an industry where there is a risk for financial fraud, money laundering, identity fraud, age-restricted services, or certain criminal activities, there are a few acronyms to know so you don’t get in trouble for participating in or facilitating illegal activity. These include:
- KYC – Know Your Customer
- CDD – Customer Due Diligence
- EDD – Enhanced Due Diligence
- AML – Anti-Money Laundering
The laws and regulations surrounding these acronyms are most applicable in the banking industry, financial sector, e-currency, or age-restricted services such as gambling.
KYC and CDD
KYC (know your customer) and CDD (customer due diligence), are acronyms that describe a process of gathering information to verify a client’s identity. In-depth KYC and CDD processes are designed to prevent fraudulent activity. Unfortunately, KYC compliance is not always easy, and the process of onboarding clients in certain industries requires a lot more time and effort than most companies are able to do on their own.
Similar to KYC, EDD (enhanced due diligence) requires that you collect certain information about a customer before doing business with them. However, EDD requires a more robust and rigorous review and is specifically geared toward high-net-worth customers, as well as high-risk or large transactions. These types of transactions are heavily regulated to protect the financial sector from fraud or criminal activity. The “enhanced” requirements mean you must collect more in-depth information and document it in greater detail so regulators can have immediate access to the information if necessary. There is very little leniency in the laws and no room for mistakes. Because it’s a more complicated process, many companies prefer to have expert help with EDD requirements.
AML (anti-money laundering) is a set of regulations, laws, and procedures that certain businesses must follow to prevent criminals from laundering money or disguising criminally-obtained funds as legitimate income. These laws target some of the most common criminal financial activities, including:
- Market manipulation
- Illegal goods trading
- Tax evasion
- Public funds corruption
- Funding terrorism
- Concealing money derived from these crimes
Companies and institutions can avoid becoming involved in these crimes by taking all the necessary steps to check out a client during the onboarding process. AML laws require that you perform specific checks before you engage in a business relationship, monitor and report suspicious activity, and keep detailed records of all financial transactions.
An automated client onboarding solution can streamline compliance with KYC, EDD, CDD, and AML regulations. Not only will this help you avoid unwittingly breaking the law by missing an important step in the process, but it can also speed up onboarding and improve the client experience for all your law-abiding clients.
Talk to GuideCX today about our automated solutions for KYC and other onboarding and learn more about why you need this essential tool for your business.