What is customer due diligence in banking?

Financial services firms have a regulatory duty to monitor and minimize the occurrence of financial crime. As such, banks need to have Financial Crime Compliance (FCC) policies and procedures in place to identify bad actors and transactions that are fraudulent or pertain to money laundering.

Customer Due Diligence (CDD) is the process of collecting and evaluating relevant information about an existing or potential customer. This involves background checks and other screening procedures to ensure an accurate risk assessment of customers is performed before onboarding. This is central to Anti-Money Laundering (AML) and Know Your Customer (KYC) initiatives.

CDD consists of 1) customer identification and verification, 2) beneficial ownership identification and verification, 3) understanding the nature and purpose of customer relationships, and 4) ongoing monitoring and reporting of suspicious transactions and, on a risk basis, maintaining and updating customer information.

These activities involve a massive volume of complex, unstructured documents which require manual processing and extraction of data. Instabase can help automate the CDD process by automatically classifying customer documents, extracting relevant information, and validating data with both internal and external sources. This information is then structured and delivered to downstream applications such as origination, underwriting, and CRM systems for further business decisioning.