Ongoing Customer Due Diligence (ODD) With the Help of Risk Insight Experts
In addition to the initial assessment of the inherent risk of a customer, it is important to consider how a customer’s relationship and risk changes over time. Therefore, a key aspect of an AML-CFT compliance program is the establishment of a risk re-evaluation process to determine whether the customer risk rating should change.
Companies should be required to ensure that documents, data or information collected under the customer due diligence (CDD) or enhanced customer due diligence (EDD) process is updated and still relevant
Especially with high-risk customers it is essential to define an ongoing customer due diligence (ODD) process, which should periodically check that all customer information and documentation, provided at the time of establishing the relationship, and all due diligence reports on that customer still reflect the nature of the relationship and the customer’s business.
A company generally relies upon the identification and verification steps undertaken, unless it has doubts about the veracity of that information. Examples of situations that might lead an institution to have such doubts could be where there is a suspicion of money laundering in relation to that customer. For example, a customer is a low-risk one and an article is published in the main national newspapers that such a customer is involved in a fraud scheme. At this moment the compliance officer has to evaluate whether is necessary to raise the risk rating to high and start an enhanced customer due diligence (EDD), followed by a period ongoing due diligence, let’s say every six months but not more than twelve months.
It is recommended that these elements be considered when conducting an ongoing customer due diligence (ODD):
- Geographic risk
- Customer’s products, services and distribution channels
- Branches, subsidiaries and affiliates of correspondent banking clients and of the institution
- Source of funds
- Source of wealth
- Client’s customer base and business
- Client’s regulatory status and history
- Client’s anti-money laundering controls
- Visits to the client’s business, locally and abroad
- Enhanced due diligence regarding the involvement of politically exposed persons (PEPs) with the customer’s business
- The directors, principals, shareholders and beneficial owners should be listed in sanction lists and should not be involved in bribery, corruption, fraud, and evasion of sanctions, e.g. when a supplier imports gold from Venezuela and sells to US gold importers as it were from Colombian or Peru
Any company needing to establish an ongoing monitoring process and conduct ongoing customer due diligence (ODD) should seek the external assistance of Risk Insight experts.
Risk Insight experts can conduct ongoing customer due diligence (ODD) to protect your company from legal, financial, organization and reputation risks.