Typically, the service involves documentation of customer on-boarding procedures but can also include things like reviewing ownership structures and legal arrangements to identify beneficial owners. In these cases, the provider will usually engage directly with these persons on your behalf verifying their name, date of birth and address using electronic sources. And on occasion for high-risk customers, this will include collating information to verify the source of funds or wealth of a customer. At completion, a report detailing findings is provided and then most reporting entities file this report and note that ‘all CDD requirements are met’.

This service is useful, efficient, and in many cases more cost effective than completing the work in-house. However, any third party completing CDD on your behalf is (as mentioned above) only your agent. They have the legal authority to represent you, but in every circumstance, you remain responsible for ensuring CDD conducted by the third-party provider is undertaken to the level required by the AML/CFT Act.

There are additional CDD legislative requirements that in most cases your contracted third-party provider will not be able to complete for you. These include: 

• The requirement to obtain information on the nature and purpose of a proposed business relationship. This information needs to be considered alongside the type of service, activity or transaction to be provided to the customer.
• Other information to determine the level of risk and whether enhanced CDD is required. You may need to obtain further information from the customer so this can be determined.
• The conducting of ongoing CDD and account monitoring obligations, where you must regularly review the CDD information you hold for a customer (including that undertaken by the third-party provider).

The best advice we can give you is to make sure your CDD policies and procedures clearly explain what is undertaken by your outsource provider and what is done in-house. 

If this article raises any questions for you or you are not sure if your policies and procedures are correct then give our team a call – we are here to help.