Customer due diligence (CDD) is a set of rules that require banks and other financial institutions to identify their customers, understand the nature of their accounts, and watch for transactions that look suspicious. CDD grew out of the Bank Secrecy Act and was expanded by the USA PATRIOT Act and later FinCEN rules. A "risk-based" approach lets banks apply lighter checks to low-risk customers and deeper checks to higher-risk ones. Because the government decides what counts as "higher risk," CDD rules give regulators a powerful lever to shape who banks scrutinize and who they may turn away.
CDD rules decide which customers banks scrutinize and what counts as suspicious. When regulators broaden those rules, the costs often fall first on communities with less money, less documentation, or more contact with enforcement systems.
People often treat CDD as a ban on serving noncitizens or high-risk customers. It is not. CDD requires banks to identify customers and assess risk, but the government still has to define what risks banks should weigh.
CDD rules decide which customers banks scrutinize and what counts as suspicious. When regulators broaden those rules, the costs often fall first on communities with less money, less documentation, or more contact with enforcement systems.
People often treat CDD as a ban on serving noncitizens or high-risk customers. It is not. CDD requires banks to identify customers and assess risk, but the government still has to define what risks banks should weigh.