How Can You Identify A High Risk Customer?

What is CDD and EDD?

The second step is Customer Due Diligence (“CDD”) which requires the bank to obtain information to verify the customer’s identity and assess the risk.

If the CDD inquiry leads to a high risk determination, the bank has to conduct an Enhanced Due Diligence (“EDD”)..

What products and services are considered high risk for money laundering?

Additionally, transactions that are processed quickly (i.e. electronically) such as wire transfers, or are difficult to trace such as cash or negotiable instruments (e.g., monetary instruments, drafts, bearer securities, stored-value cards) also are high-risk activities for money laundering.

What is a high risk business activity?

business activities: cash-based businesses; money service bureaus; arms dealers; and property transactions with unclear source of funds; foreign politically exposed person; new clients carrying out one-off transactions; … the client has multiple bank accounts or foreign accounts with no good reason; or.

How do you identify customers at risk?

7 Signs Your At-Risk Customer Might ChurnPro tip: If your customer doesn’t give you the reason for their low NPS survey score, look to your online community. … Disgruntled/angry comments. … Elementary questions. … Inactive customers. … Low number of support tickets. … High number of support tickets.More items…•

What industries are considered high risk?

Here is a list of popular industries that typically most lenders view as a high-risk investment:Accounting.Agriculture.Alcohol.Construction.Financial services.Food.Insurance.Media.More items…•

What is high risk account?

What is a high-risk merchant account? A high-risk merchant account is a payment processing account for businesses considered to be of high risk to the banks. As high-risk businesses are more prone to chargebacks, they come with the need for paying higher fees for merchant services.

What are know your customer requirements?

The Know Your Customer Rule 2090 essentially states that every broker-dealer should use reasonable effort when opening and maintaining client accounts. It is a requirement to know and keep records on the essential facts of each customer, as well as identify each person who has authority to act on the customer’s behalf.

What is an example of a high risk investment?

They include the Rule of 72, options investing, initial public offerings (IPOs), venture capital, foreign emerging markets, REITs, high-yield bonds and currencies.

What are considered higher risk customer types?

There are high-risk customers your institution may be more familiar with, such as cash intensive businesses, nonresident aliens, foreign individuals, politically exposed persons (PEPs), and money service businesses (MSBs); however, there are also other high-risk customers to consider, such as nonbank financial …

What is customer risk profiling?

‘Customer risk’ in the present context refers to the money laundering risk associated with a particular customer from a bank’s perspective. This risk is based on the risk perceptions associated with the parameters comprising a customer’s profile, and the risk associated with the product and channel being used by him.

What are the three 3 components of KYC?

To create and run an effective KYC program requires the following elements: Customer Identification Program (CIP) How do you know someone is who they say they are? … Customer Due Diligence. … Ongoing Monitoring.

What is the safest type of business to start?

If you want to ensure the security of your future and the future of your potential business, consider starting one of these seven lower-risk businesses.Consulting. … Tutoring. … Virtual assistant. … Direct sales. … Drop-shipping. … Service business. … Senior care.