Exploring Customer Due Diligence under IFSCA (AML, CFT & KYC) Guidelines

The IFSCA (AML, CFT, and KYC) Guidelines, 2022 mandate the regulated entities to perform adequate Customer Due Diligence (CDD) as part of the AML program to detect and manage the money laundering and terrorism financing risk.

Here is an infographic discussing Customer Due Diligence as per IFSCA AML Guidelines and the circumstances when the IFSCA requires the regulated entity to perform appropriate CDD measures.

Customer Due Diligence is a process involving the identification of the customer and its beneficial owners (in the case of a company or any other legal person) and verifying the identities using reliable, independent sources. CDD must also include measures to understand the nature and purpose of the business relationship. Basis these details, the customer risk profile must be determined, and additional checks must be deployed if required. Further, CDD is not a one-time activity; rather, it involves ongoing monitoring of the business relationship and the transactions executed by the customers to detect the change in the customer’s risk profile and adopt necessary measures aligned with the revised risk profile.

To make sure that the entities do not inadvertently engage with financial criminals, the IFSC AML Guidelines provide for performing the CDD process under the following circumstances:
– Before or at the time of establishing a business relationship with a new customer
– when the regulated entity has reasonable doubt about the accuracy or adequacy of the details/documents of existing customers, which were obtained earlier at the time of onboarding
– When the regulated entity observes any ML/FT-related red flags or the transactions appear to be suspicious
– when there is a significant change in the customer’s risk profile, warranting reperformance of the CDD process

When the regulated entities appropriately apply CDD measures and identify the customer it engages with, the risk of being exploited by financial criminals is reduced.

Let AML India assist you in designing the robust CDD process, including KYC, customer risk profiling, and enhanced due diligence measures to manage high-risk customers. Stay safe and stay compliant.