Market Research Report Impact Of Money Laundering On Customer Due Diligen | Page 2

Customer due diligence is the analysis of the customers in context of legal issues like anti money
laundering and also regulatory compliance. The important regulatory measures that drive CDD
are The 4 th AML Directive and Financial Action Task Force (FATF) Recommendations and
Membership. The FATF is an inter-governmental body established in 1989 by the Ministers of
its Member jurisdictions. The aim of the FATF is to set standards and to promote effective
implementation of legal, regulatory and operational measures for keeping a check on money
laundering, terrorist financing and the financing of proliferation and other related threats to the
integrity of the international financial system.
Ken research has announced new research “ The Impact of Money Laundering on Customer Due
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Diligence” on the impact of money laundering on customer due diligence which talks about the 4
money laundering directive which was passed by EU. The report gives the detailed analysis of
the key operational and technological trends and challenges that institutions face due to the rapid
rise in money laundering activity and frequent regulatory upgrades. Customer due diligence
(CDD) also known as Know Your Customer (KYC) is central to an effective anti-money
laundering and counter-terrorism financing (AML/CTF) regime. It is important to identify and
verify each customer so as to determine the money laundering risk posed by the customer and
also to determine whether to build the business relationship or not. According to the 4 th money
laundering directive simplified Customer Due Diligence will no longer be applicable in most
circumstances. All transactions/clients require a degree of risk assessment to demonstrate that it
presents a lower degree of risk and requires sufficient ongoing monitoring. There will be no
blanket exemption from CDD. Transactions where enhanced due diligence (higher risk) will be
required include those involving asset holding vehicles and cash-intensive businesses, those
where unusual or apparently unnecessarily complex ownership structures are in place. Thus,
strict rules are placed to avoid illegal activities.
Historically AML models relied on qualitative methods like expert judgment. However today,
these models are integrated with sophisticated scoring algorithms and have other quantitatively
derived components, such as segments and thresholds. These techniques have helped the AML
industry to grow and provide accurate results. AML models include transaction monitoring
software vendor products, large homegrown transaction monitoring systems, customer risk rating
models and alert risk scoring models. These methods help in effective customer due diligence.