Customer Due Diligence Process is one of the core activities performed by financial and lending institutions. This is the activity that they undertake to know their clients completely. This activity also includes a risk assessment of the customer and identifies potential risks like the ability to commit money laundering, terrorism financing, and fraud. Customer Due Diligence is a core part of KYC – “Know Your Client” required by all regulatory frameworks to ensure compliance and monitor and regulate the risks.
The entire Customer Due Diligence (CDD) guidelines have been prescribed in India by agencies and Acts like Prevention of Money Laundering Act, 2002, (PLMA), RBI and SEBI guidelines and also by the Insurance Regulatory Development Authority (IRDA).
This process also involves the vetting of a customer’s financial and business information. Continuous monitoring is required to trace any red flags that indicate illegal or suspicious transactions. This helps the institutions to identify potential risks and vulnerabilities. Continuously refining the CDD requirements, meeting the regulatory provisions, and enhancing the defences against fraud are also necessary for institutions.
Taurus Collection providing comprehensive debt collection service for both B2B and B2C customers is well poised to provide CDD services. Right from vetting your customers to collection of outstanding invoices and debt including legal services to enhance your collection efforts, we are a one stop destination for all collection related services that you may require. We have an extensive client base of small and medium industries (MSMEs) that rely on our expertise and ethical methods of collection.
There are three interconnected but distinctive due diligence in existence.
Simplified Customer Due Diligence
This is a basic level of risk assessment of clients who are potentially low risk. This is to ensure that such clients do not pose a regulatory risk. This type has also been classified as Standard Customer Due Diligence.
Basic Customer Due Diligence
This type of due diligence is meant for customers with an average level of risk. In this, the investigation and scrutiny is at a higher level to understand their business risk and relationships.
Enhanced Due Diligence
This type of CDD is meant for high-risk customers including politically exposed customers. More thorough research into their political, economic, business, and financial background is required. Such accounts require continuous monitoring and regular review. This type is also known as Ongoing CDD. This helps to keep the customer’s risk profile updated and current.
A judicious combination of these three types of customer due diligence helps lending institutions to put in place a robust risk management strategy.
The progressive stages of CDD involve many steps right from the initial contact with the clients, continuous monitoring, and review with maintenance of complete records for the life of the relationship. This is a systematic approach that meets all regulatory standards and provides a strong defence against fraud. The important steps included in this process are the following:
Gathering customer information and Customer Identification
The first step in the CDD process is collecting all the relevant customer information. During this stage, all personal and business information and transaction behaviour are collected in sufficient detail to analyse the customer’s nature and the nature of his business relationships.
Completing KYC checks and customer verification
During this stage, the customer’s government issued identity details like Aadhaar and Pan Card are identified by using biometric authentication and passive liveness detection is used. This information is used to authenticate the true credentials of the customer.
Risk assessment
This stage involves creating a risk profile for the client based on many factors including; KYC information, the geographical location, type of business, transaction patterns, etc. All these factors and the level of complexity in analysing them determines the type of CDD used.
Ongoing monitoring
Remember, a customer’s financial and business circumstances are subject to change. As such continuous monitoring is required to keep track of the changes that occur. Any inconsistencies or suspicious activity can be instantly flagged and monitored closely to determine any business risk and changes in the customer’s risk profile.
Keeping updated records
Lastly, keeping updated records of all customer details and transactions is very important in CDD. This helps in maintaining a clear record of all transactions from the inception to the day he ceases to be a customer. This helps in maintaining an audit trail, meeting regulatory requirements and helps the business to keep all details ready any time that it is required.
CDD involves primarily three steps: collecting information, verifying identity, and assessment of risk. Maintaining updated records for future reviews and requirements is also enabled by this process.
Customer Due Diligence helps to reduce financial crimes, enhancing your company’s reputation and improves risk management measures in place. Doing customer due diligence helps companies to achieve better control over cashflows and operational excellence.
Taurus Collection experts advise and guide you through the collection and account receivables process, simplifying the journey, offering seamless solutions with precision and efficiency. By combining cutting-edge technology with a customer-centric approach, Taurus Collection ensures compliance with regulatory requirements while fostering trust and transparency. Whether you’re safeguarding your business or building stronger customer relationships, we’re here to make the process stress-free. Partner with us today and take the first step towards a safer, more secure future for your organization. Let’s navigate due diligence together—because your customers deserve nothing less.
Taurus Collection is a B2B & B2C collection agency that goes beyond the ordinary. With a commitment to excellence, we offer a ‘No Collection, No Fee’ service that is backed by our in-house advocates with an exceptionally high success rate.
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