How to complete customer due diligence (CDD)

Learn more about the customer due diligence questions on Amplify's business account application.

Written By Julie Macaluso (VP of Commercial Banking)

Updated at April 23rd, 2024

Customer due diligence – often abbreviated as CDD – is a process that financial institutions, businesses, and other organizations use to gather information about their customers and members to identify and mitigate risks.  In this article, we will further break down the CDD questions included in the online application for business deposit accounts.

Key Takeaways:

  • Financial institutions are required to complete customer due diligence (CDD).
  • CDD is used to gather information about our members to identify and mitigate risks.
  • The CDD questions in the business deposit account online application are mandatory.

Does any portion of business income come from internet gambling?

Internet gambling refers to the practice of placing bets or wagers on games or events using the internet. Businesses can earn income from internet gambling by operating online casinos, sports betting platforms, poker rooms, or other forms of online betting services. 

These types of business are typically involved in the cultivation, processing, distribution, or sale of products derived from cannabis plants.

  • Marijuana refers to cannabis strains with high levels of THC.  Marijuana related businesses may include dispensaries, cultivators, manufacturer of THC-infused products like edibles or concentrates, and delivery services.
  • Hemp is a variety of cannabis that contains very low levels of THC (less than 0.3% in the US).  Hemp related business often focus on producing hemp-derived products such as textiles, paper, biofuels, construction materials, and health supplements.
  • CBD (Cannabidiol) is a non-psychoactive compound found in cannabis plants, particularly abundant in hemp.  CDB related businesses primary manufacture and sell CBD-infused products such as oils, tinctures, capsules, topicals, and edibles.  These products are often marketed for their potential health and wellness benefits.

Does your organization provide financial services as a nonbank financial institution?

Nonbank financial institutions (NBFIs) do not have a full banking license but provide financial services similar to traditional banks. These businesses operate outside of banking regulations and may offer services such as lending, investing, insurance, and wealth management.

Examples of NBFI include investment banks, insurance companies, mutual funds, pension funds, leasing companies, and crowdfunding platforms.

Is the organization an embassy, foreign consulate, or foreign mission?

These organizations represent the interest of one country in another. This is accomplished by agreements between governments or by being officially designated as such by their respective countries' diplomatic authorities.

  • Embassies serve as the diplomatic representation of one sovereign state to another. They are headed by an ambassador who represents the sending country's government and serves as a primary liaison between the two countries.
  • Consulates are an extension of an embassy where the primary focus is providing consular services to citizens of the sending country. This can include issuing visas, passports, and providing assistance in emergencies. Consulates are headed by a consul or consul general.
  • Foreign missions fall under a broader term that encompasses both embassies and consulates.  This term refers to any diplomatic representation of a country in another country, regardless of whether it's located in the capital city or elsewhere. They work to advance their country's interests, maintain diplomatic relations, and provide services to their citizens abroad.

Will the account be used for correspondent banking purposes?

Correspondent banking is a banking relationship established between two financial institutions – often in different countries – to facilitate financial transactions and services on behalf of their respective clients.

These relationships play a role in facilitating global commerce and financial flows by providing access to international markets. They also enable cross-border transactions using services such as wire transfers, currency exchange, trade finance, and clearing services to their clients who conduct business in foreign currencies or in jurisdictions where they don't have a direct presence.

Will you be processing transaction that benefit a third party?

In banking, being a third-party payment provider refers to a company or entity that facilitates financial transactions between two parties, where the provider itself is not the buyer or seller in the transactions.  These providers often act as intermediaries, processing payments on behalf of merchants or consumers.

Here are a few examples of businesses that engage in third-party payments.

  • Payroll processing companies are firms that handle payroll administration for businesses, including calculating wages, deducting taxes, and disbursing payments to employees.
  • Financial advisors or wealth management advisors are professionals who manage financial assets and investments on behalf of clients. 
  • Brokerage firms are companies that facilitate the buying and selling of financial securities, such as stocks, bonds, and mutual funds on behalf of investors.
  • Investments funds are entities that pool money from investors to invest in various financial assets, such as stocks, bonds, or real estate, with the goal of generating returns for investors.
  • Escrow services are companies that hold funds or assets in escrow during a transaction, ensuring that both parties fulfill their obligations before releasing the funds or assets to the appropriate party.
  • Loan servicing companies are firms that manage the administration of loans on behalf of lenders, including processing payments, managing escrow accounts, and handling borrower communication.

Do you own, operate, or replenish a privately owned ATM, or does your business offer courier or armored car services to ship currency on a customer’s behalf?

If your organization relies on ATM or courier/armored car services, the following definitions may apply to you.

  • ATM ownership means the individual or business purchased the machine outright or entered into a leasing agreement with an ATM provider.  As the owner, you are responsible for the initial investment, maintenance, and compliance with regulations.
  • ATM operation involves setting up and managing the machine to endure it functions properly.  This includes tasks such as installing the machine at a suitable location, configuring the machine's settings, maintaining adequate cash levels, and troubleshooting any technical issues that arise.
  • ATM replenishment refers to regularly restocking the machine with cash to ensure that it can continue dispensing money to users. This typically involves coordinating with a cash management provider or financial institution to deliver cash to the ATM location and loading it into the machine's cash cassette.
  • Courier or armored car services are businesses that provide secure transportation of cash or valuables between locations on behalf of clients.

 

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