Customer due diligence (CDD) is a critical element in effective risk management – protecting you and your business against involvement in financial crimes or money laundering. As a result, CDD is an integral part of the New Zealand Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT).
While CDD measures vary according to your business risk profile and the type of clients you work with, on a basic level, they involve identifying your customers and assessing their risk. A robust CDD process promotes business integrity and overall stability in the New Zealand financial ecosystem, but it can be hard to implement an effective program if you don’t understand how the requirements work.
Here’s your guide:
When is CDD required?
CDD is the tool used to verify customers’ identities and assess the potential risk they pose to your business. It’s required when:
- Establishing a new business relationship – ensuring identities stack up.
- For occasional transactions – for example, when you’re dealing with high-value transactions (over a threshold determined by the individual business) or transactions made with high-risk countries. In New Zealand, you are also required to report any transactions of $10,000 or more in physical currency.
- There is suspicion of money laundering
- The documentation provided is questionable – companies should undertake further CDD measures if identification documents are inadequate.
CDD measures are risk-based
CDD measures need to be adapted to match the risk posed by clients. Under the New Zealand AML/CFT Act, there are three basic types of CDD:
- Standard CDD – this applies to most New Zealand customers and involves the collection and verification of identity information.
- Simplified CDD – this applies to a specified set of organisations such as Government departments and the New Zealand Police. Businesses in these categories are required to provide a basic level of information and verification isn’t needed.
- Enhanced CDD – when a greater level of risk is identified, businesses are required to implement enhanced due diligence (EDD). This is dependent on the customer, but typically includes ongoing monitoring, additional identification and scrutiny of transactions.
Adapt CDD measures to fit, and keep your business safe
The AML/CFT Act requires businesses to adapt, and use different CDD measures based on customer situations and varying levels of risk. Getting it right 100% of the time can be a challenge. That’s why working with a specialist AML software provider is a smart move.
First AML will help you navigate the regulatory landscape, manage the CDD process and keep your business safe from potential threats – leaving you to focus on what’s important.
Get in touch to find out more.