Certified Global Sanction Specialist (CGSS) Chapter 3

3-1 Describe customer due diligence (CDD) as part of risk management. 3-1 Customer due diligence (CDD) is a set of internal controls that enable a financial institution to establish a customer's identity, predict with relative certainty the types of transactions in which the customer is likely to engage, and assess the extent to which the customer exposes the institution to a range of risks (i.e., money laundering and sanctions). Organizations need to know their customers through CDD to guard against fraud and comply with the requirements of relevant legislation and regulation. Effective CDD programs help to protect banks' reputations and the integrity of banking systems by reducing the likelihood of banks becoming a vehicle for or a victim of financial crime. As such, they constitute an essential part of sound risk management.