Customer Due Diligence (CDD) is a crucial process that banks in Hong Kong are required to follow to ensure that their customers are not involved in any illegal or unethical activities such as money laundering, terrorism financing, and fraud.
The Hong Kong Monetary Authority (HKMA) has issued guidelines to banks operating in Hong Kong to follow the CDD process.
What is CDD?
CDD is a process through which banks verify the identity of their customers and assess the risk associated with them.
The purpose of this process is to ensure that banks do not unknowingly facilitate any illegal activities through their services.
The CDD process includes:
- Customer Identification: Banks need to verify the identity of their customers by obtaining documents such as passports, identity cards, and driving licenses.
- Risk Assessment: Banks need to assess the risk associated with each customer based on their profile, transaction history, and other relevant information.
- Ongoing Monitoring: Banks need to monitor the transactions of their customers on an ongoing basis to ensure that they are consistent with their risk profile and expected activities.
- Enhanced Due Diligence (EDD): Banks need to conduct EDD for high-risk customers, such as politically exposed persons (PEPs) and customers from high-risk countries.
How do Hong Kong banks conduct CDD?
Hong Kong banks follow a risk-based approach to conduct CDD. This means that they assess the risk associated with each customer and apply appropriate measures based on the level of risk.
Banks in Hong Kong follow the following steps to conduct CDD:
- Customer Identification: Banks verify the identity of their customers by obtaining documents such as passports, identity cards, and driving licenses.
- Risk Assessment: Banks assess the risk associated with each customer based on their profile, transaction history, and other relevant information. They use a risk-based approach to determine the level of risk.
- Ongoing Monitoring: Banks monitor the transactions of their customers on an ongoing basis to ensure that they are consistent with their risk profile and expected activities.
- Enhanced Due Diligence (EDD): Banks conduct EDD for high-risk customers, such as PEPs and customers from high-risk countries. EDD includes obtaining additional information about the customer, their source of funds, and the purpose of the transaction.
- Record Keeping: Banks are required to maintain records of their CDD process and transactions for at least seven years.
Conclusion
CDD is a crucial process that banks in Hong Kong follow to prevent money laundering, terrorism financing, and other illegal activities.
The HKMA has issued guidelines to banks to follow the CDD process and apply appropriate measures based on the level of risk associated with each customer.
Banks in Hong Kong are required to conduct ongoing monitoring and maintain records of their CDD process and transactions. The CDD process helps to maintain the integrity and reputation of the financial system in Hong Kong
