Banking Exam

What is the primary distinction between Know Your Customer (KYC) and Customer Due Diligence (CDD)?

KYC is performed only for high-risk customers, while CDD is for all customers. KYC focuses on ongoing transaction monitoring, while CDD is a one-time identity verification at onboarding. KYC is the initial process of identifying and verifying a customer's identity, while CDD is the ongoing process of assessing that customer's risk. KYC is mandated by the USA PATRIOT Act, while CDD is a recommendation from the Financial Action Task Force (FATF).

Correct Answer:

KYC is the initial process of identifying and verifying a customer's identity, while CDD is the ongoing process of assessing that customer's risk.

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