ADGM Quick Guide - Customer

Due Diligence (CDD)

Guide for DNFBPs

Types of Customer Due Diligence

The level of your customer’s Money Laundering and Terrorist Financing (ML/TF) risk is dynamic in nature and may change over time
depending on several factors. Such factors include customer identification and acceptance, the nature of their business and
outcomes of ongoing monitoring. You should always be prepared to change the level of due diligence exercised on a customer
whenever the circumstances require.
Customer Due Diligence (CDD), Simplified Customer Due Diligence (Simplified CDD) and Enhanced Customer Due Diligence
(Enhanced CDD) is the process of evaluating relevant information of your customer collected during the Know Your Customer (KYC)
stage. Further detail on KYC is available in the KYC Quick Guide.

Customer Due Diligence (“CDD”)

CDD includes the collection of identification information and documents to verify a customer’s identity, including beneficial owners (if the client is a
company). CDD also includes assessing and understanding the purpose and intended nature of the business relationship and then conducting
ongoing due diligence on the business relationship throughout the lifecycle of the relationship.

Simplified Customer Due Diligence (“Simplified CDD”)

Simplified CDD refers to applying simplified CDD measures, which may be acceptable when a customer risk rating is assessed as “Low”. Simplified
CDD includes reduced verification requirements such as verifying the identity of the customer and any beneficial owners after the relationship is
established, more high-level inquiries about the nature of the business relationship and limited ongoing CDD. Simplified CDD involves the following,
for example:
• Obtaining copies of verification documents from reliable resources;
• Collecting a reduced amount of information to understand the purpose of the business relationship; and
• Reducing the frequency of ongoing transaction monitoring.

Enhanced Customer Due Diligence (“Enhanced CDD”)

Enhanced CDD refers to applying higher standards for identification documents, a detailed evaluation of the purpose of establishing a business
relationship, and increased monitoring of the ongoing business relationship. Enhanced CDD is generally applicable to customers, whose ML/TF risk
was assessed as “High”, or where the customer or a beneficial owner of the customer is a PEP, and involves:
• Additional identification information on the customer and beneficial owners;
• Obtaining additional information on the intended nature of the business relationship and transactions (for instance, if sources of funds for a
transaction appear to be inconsistent with a customer's ordinary behaviour);
• Identifying and verifying the sources of funds and sources of wealth; and
• Conducting enhanced ongoing monitoring of business relationships and increasing the frequency and level of controls applied.

This Quick Guide is produced for general information purposes only. It is not comprehensive and does not constitute formal guidance. This Quick Guide
should be read together with the Financial Services and Markets Regulations 2015, the Anti-Money Laundering and Sanctions Rules and Guidance and
applicable federal legislation. You should seek appropriate professional advice if necessary to ensure your full understanding of your obligations under
relevant regulations, rules and legislation. Regulations, rules and legislation may change on short notice, and you should ensure your understanding of the
same remains up to date. This Quick Guide may not reflect the most recent requirements set out in relevant regulations, rules and legislation.
ADGM Quick Guide for DNFBPs

Overview of Customer Due Diligence

Customer Due Diligence
Identify and Verify Customer Identify and Verify
• Individuals: verification of Beneficial Owner
customer identity (e.g. passport Identify and verify the person
copy, ID and address) who controls or owns the
• Corporates: corporate customer, directly or indirectly,
documents (e.g. memorandum
of association and commercial
to understand the true
ownership of your customer
When is CDD conducted?
licence)
Examples of scenarios where you must conduct Customer
Due Diligence include:

Ongoing CDD Understand the nature

• before or during the course of establishing a business
Continuously monitor and update of the relationship relationship or opening an account; and
your customer’s information on a Understand the nature of • before carrying out a transaction for a customer with
periodic basis or whenever there the relationship and assess whom you are not in an established business relationship.
is a trigger event (i.e. change of whether it is aligned with
beneficial owner) your customer’s activities

Simplified Customer Due Diligence

Simplified CDD is typically conducted if the customer meets the following criteria:

The customer is rated as Low risk

Transactions carried out by the customer are in line with the customer’s profile and are low value

There is no suspicion of money laundering or terrorism financing

What does Simplified CDD entail?

• Requiring customer to only provide limited identity verification documents (e.g. passport/ID
copy)
• Less frequent transaction monitoring on the customer if the transaction is recurring, routine
and well-defined within the customer risk parameters

One-off (occasional) transactions

Depending on the nature of your business, you may deal with customers with whom you do not have an established business relationship, and with
whom you conduct one-off or occasional transactions. If such transactions are worth less than USD 15,000 (AED 55,000), depending on your
Customer Risk Assessment (CRA) policy, you may consider obtaining basic information about such customers, such as completing a simplified
personal information form and collecting minimum KYC documents.
If an occasional transaction (whether single transaction or several transactions that appear to be linked) is equal to or more than USD 15,000 (AED
55,000), depending on the risk rating assigned to your customer:
• you must identify and verify the customer's identity including any beneficiaries or controlling persons;
• you must apply appropriate risk-based measures that could include obtaining an understanding of the nature of the customer's business and the
purpose of the transaction; and
• where there are doubts over the truthfulness or accuracy of such information, you should consider raising a Suspicious Activity Report.
 ADGM Quick Guide for DNFBPs

Overview of Enhanced CDD

Enhanced CDD measures are mandatory when a customer poses higher ML/TF risk.
Determination of customer risk is based on your Customer Risk Assessment (CRA).
Higher risk factors may include, for example:

01
Customers that use
02
Customers with cash
03
Customers who are
complex legal intensive businesses PEPs or PEP
structures Associates

What does Enhanced CDD entail?

• Obtaining additional identity verification documents and additional information on the nature of the business relationship
• Obtaining information on transactions conducted and determining the transactions that may require further examination
• Updating the CDD profile regularly, conducting enhanced monitoring and increasing the frequency and level of controls applied
• Obtaining senior management approval to commence the relationship
• Verifying the current residential address for customers that are natural persons
• Identifying and verifying the source(s) of funds, i.e. the origin of a company's or individual’s funds for the purposes of a specific business
relationship or transaction. Verification documents may include bank statements, recently filed business accounts and documents confirming
the origin of funds, such as the sale of a house, sale of shares, savings, dividends or inheritance
• Identifying and verifying the source(s) of wealth, i.e. activities that generated an individual’s wealth throughout their lifetime. Verification of
documents may include those relating to inheritance, investments, ownership of a business or employment
• Ensuring the first payment is paid through the customer’s own account at a licensed financial institution that is subject to money laundering
regulation and supervision in a jurisdiction that has standards equivalent to those set out in the FATF Recommendations
• Understanding the reason for your customer’s complex legal structures or arrangements
• Performing background checks (via a combination of internet searches, public databases and subscription information services) to screen for
possible matches on sanctions lists

Upon completion of Enhanced CDD on high-risk customers, your senior management must be involved in the
decision making as to whether to onboard (or continue business relationship with) such customers. By involving
senior management in the decision-making process, you ensure that all decisions are made in accordance with
your firm’s risk management policies and procedures and that senior management is fully aware of the potential
risks associated with the customer.
ADGM Quick Guide for DNFBPs

Ongoing Customer Due Diligence

Ongoing Customer Due Diligence must be conducted on a recurring basis, depending on the risk associated
with your client. The frequency of undertaking ongoing CDD on existing customers will be determined by the
risk rating assigned to a particular customer. Customers whose ML/TF risk was assessed as “High” should be
reviewed more frequently than customers whose risk is “Low”.

Examples of circumstances that trigger a CDD refresh, as part of your ongoing CDD:

Your customer’s beneficial owner(s) change

An unusual transaction occurs, that is not aligned with your

customer’s profile

A material change in the business relationship and/or nature or

ownership of your customer

When undertaking ongoing CDD on customers, you must follow the following process:
Monitor all complex and/or unusual transactions to ensure consistency with your customer’s profile. Where complex or
unusual transactions identified, enquire into the purpose and background of these

Review the CDD information on file for customers and beneficial owners, including information provided on a periodic
basis to ensure the information is valid and re-assess the risk rating assigned to your customer, to ensure it remains
appropriate

info@adgm.com | +971 2 333 8888 | www.adgm.com | September 2023

This Quick Guide is produced for general information purposes only. It is not comprehensive and does not constitute formal guidance. This Quick
Guide should be read together with the Financial Services and Markets Regulations 2015, the Anti-Money Laundering and Sanctions Rules and
Guidance and applicable federal legislation. You should seek appropriate professional advice if necessary to ensure your full understanding of your
obligations under relevant regulations, rules and legislation. Regulations, rules and legislation may change on short notice, and you should ensure
your understanding of the same remains up to date. This Quick Guide may not reflect the most recent requirements set out in relevant regulations,
rules and legislation.