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Definition
Customer Due Diligence (CDD) is a regulatory process that financial institutions and other regulated entities use to verify the identity of customers and evaluate the potential risks they pose. CDD involves collecting and validating personal or business information such as name, address, identification documents, and beneficial ownership details.

Why it matters
CDD is a foundational requirement in anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. It helps institutions detect suspicious activity, prevent financial crime, and comply with global laws such as the Bank Secrecy Act (BSA), FATF recommendations, and the EU’s AML directives.

Example use case
A fintech company performs CDD when a new user opens an account by requiring a government-issued ID and a recent utility bill to confirm their identity and address before enabling transactions.