Risk-Based Customer Due Diligence: Regulatory Approaches

Paper
Date Published: 
Oct 2019
Author: 
Patrick Meagher
Publisher: 

Weighing the pros and cons of risk-based approaches to customer due diligence

Regulators face a challenge in balancing policies on anti-money laundering and combating the financing of terrorism against placing the least burden on outreach to the poor and unbanked. This Technical Note provides guidance on using risk-based approaches to customer due diligence (CDD), supported by examples drawn from around the world. There are three regulatory options for employing risk-based CDD:

  1. Principles-based approach.
  2. Single low-risk threshold.
  3. Framework of multiple risk tiers.

Each requires regulators to determine the level of risk and then to decide the appropriate processes of simplified due diligence.

Type: 
Paper