26 Questions
What is the first part of a CDD investigation according to the text?
Identification and Verification
Which components are specifically applicable in the investigation of entities?
Ownership & Control structure, Sustainability risk, Tax avoidance risk
What is NOT included in the investigation on individuals according to the text?
Tax avoidance risk
Which department in a company investigates entities according to the text?
Business department
In a CDD investigation, what type of activity involves examining how an individual earns money?
Business activities
Which part of a CDD investigation covers where the funds are coming from?
Source of Funds
What is the purpose of investigating the country risk in the context of financial transactions?
To understand where the client conducts business activities
Why is it significant for a baker to withdraw a large sum in cash every month?
It raises concerns as it is unusual for a bakery in northern Europe
In the context of Source of Funds, what information is essential to investigate?
The pattern of funds being transferred
What does Source of Wealth primarily aim to determine?
The legitimacy of a client's wealth accumulation
How can an organization chart be used in assessing tax risk?
To evaluate potential tax avoidance possibilities
What does E.S.G stand for in the context of financial investigations?
Environment, Social, Governance
How can Adverse Media screening be beneficial in client assessments?
To identify if a director holds a political role
Why is investigating Adverse Media important in financial assessments?
To screen for any negative news about the client
What aspect does Adverse Media screening specifically aim to uncover?
Negative news or information about clients
In financial investigations, what does the term PEP stand for?
Prominent Political Exposed Person
What is the purpose of the ID&V process?
To verify the identity and confirm the existence of the customer
What is the role of a Pseudo UBO?
To be responsible for the day-to-day management of the company
What is the importance of the Business Activities section?
To understand the customer's income generation
What is the role of the Product & Services section?
To determine the products and services the customer gets from the company
What is the purpose of Transaction Risk?
To look at outbound transactions to Counterparties, types of transactions and transaction patterns
What does the Ownership & Control structure deal with?
To understand the customer's organizational structure
What is the purpose of Purpose and Nature?
To describe why the person or entity is a customer at the institution
What is the importance of the Ultimate Beneficial Owner (UBO)?
To be the responsible party in case of integrity issues
What is the purpose of recording the Chamber of Commerce extract or passport information?
To verify the identity of the customer
What is the role of the employee of the Act on the prevention of money laundering and financing of terrorism mandatory institution or external third party with gatekeeper function?
To verify the identity of the customer
Study Notes
CDD Investigation Structure
- CDD is split into two main parts: Natural Persons (investigating individuals) and Business Department (investigating entities)
Identification and Verification
- First part of the CDD investigation
- Verify client's existence and identity
- Record information from Chamber of Commerce extract (for companies) or passport (for individuals)
- ID&V process can be completed and confirmed automatically or by an employee/external third party
Purpose and Nature of Relationship
- Describe why the person or entity is a customer at the institution
- Ask questions like: does it make sense for a customer located in another country to purchase certain products and services here?
Ownership and Control Structure
- Deals with the customer's organizational structure (only applies to entities)
- Get information from the customer and partially verify using public sources
- Write out the organizational structure and indicate obstacles encountered
- Identify the Ultimate Beneficial Owner (UBO) or Ultimate Beneficial Owner (Pseudo UBO) if necessary
Business Activities
- Important section to form a customer picture and conclude whether the other sections fit the customer profile
- Write down what the client does to generate income
- Describe any certifications, associations, or compliance policies
Product and Services
- Not an unimportant part of the CDD investigation
- Determine what products and services the client gets from the company
- Ask questions like: do these particular products and services fit the customer profile?
Transaction Risk
- Looks at outbound transactions to Counterparties, types of transactions, and transaction patterns
- Ask questions like: does it fit within the customer profile?
Country Risk
- Investigate the countries to which outbound transactions go and the countries in which activities take place
- Ask questions like: is it appropriate for the customer to transfer funds to a particular high-risk country?
Source of Funds
- Research the customer's income
- Look at the contra account from which the client transfers funds
- Ask questions like: from which financial institution does it come? What is the pattern of the funds being transferred?
Source of Wealth
- About the income of an Ultimate Beneficial Owner
- Want to know how that person got their wealth to avoid mixing criminally earned money with legitimately earned money
Tax Risk
- Deals with the possibility of tax avoidance
- Use the organization chart and other available information to identify potential risks
Sustainability Risk
- Investigate whether there may be human trafficking, environmental crimes, human exploitation, and carbon monoxide emissions
- Describe using public information and information from the client what the client's policy and vision is regarding sustainability and which measures are taken
Adverse Media
- Screen the client to see if there is any bad news about the client
- Use a system and sometimes Google search strings for this purpose
- If there is bad news, perhaps according to the policy it can be mitigated
Learn about the structure of a Customer Due Diligence (CDD) investigation and its main components. Discover how CDD is divided into two main parts focusing on individuals and business entities, along with the common sections involved in the process.
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