The Customer Due Diligence (CDD) Rule is a regulation issued by the Financial Crimes Enforcement Network (FinCEN) aimed at improving financial transparency and preventing financial crimes and money laundering.
According to FinCEN, the CDD rule requires covered financial institutions to “identify and verify the identity the natural persons (known as beneficial owners) of legal entity customers who own, control, and profit from companies when those companies open accounts.” Beneficial owners include any individual who owns 25 percent or more of a legal entity.
To do this, organizations must “establish and maintain written policies and procedures that are reasonably designed to (1) identify and verify the identity of customers; (2) identify and verify the identity of the beneficial owners of companies opening accounts; (3) understand the nature and purpose of customer relationships to develop customer risk profiles; and (4) conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.”