Responsible Finance Forum

TECHNICAL NOTE: RISK-BASED CUSTOMER DUE DILIGENCE | REGULATORY APPROACHES

Patrick Meagher and CGAP
01 October 2019
Source:  CGAP

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.

Originally posted on CGAP’s website