ICA Advanced Certificate in Practical Customer Due Diligence (CDD)

Why Attend

On 6th March 2020, the FATF published official guidance recognising the need for CDD teams to acknowledge the requirement that organisations may need to onboard customers virtually. Therefore, it has never been more important to have robust controls and procedures in place to Know Your Customer (KYC). Adequate due diligence on new and existing customers is a key part of these controls. Without this due diligence, your firm can become subject to reputational, operational, legal, and financial risks. We have successfully created an engaging, practical and informative learning journey that is proven to work for virtual CDD teams onboarding in a virtual world. This qualification has been designed for KYC Analysts and professionals at all stages in their career who manage risk in the Customer Due Diligence (CDD) process. As the only professional qualification in practical CDD, it is vital to understand the threat and mitigate the risk. This course is awarded in association with Alliance Manchester Business School, the University of Manchester.

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Course Objectives


  • While undertaking this qualification, you will study the following modules:
  • • Outcomes and success criteria of KYC
  • • Identification and verification
  • • Understanding the customer
  • • Understanding the relationship
  • • Beneficial ownership
  • • Understanding the control structure of the entity
  • • Customer screening
  • • Risk acceptance
  • • Enhanced due diligence


Target Audience


Heads of compliance, AML and financial crime
Money laundering reporting officers
Money laundering prevention officers
Compliance, AML and financial crime managers and senior staff
Senior risk staff
Regulatory representatives
Legal practitioners
Internal and external audit staff
Company secretaries
Accountants

The below provides a detailed overview of the course syllabus. Please be aware that ICA may test any element of the course, including that delivered in the workshops.

 

Outcomes and success criteria of KYC

  • Introduction
  • The importance of clear outcomes
  • Applicability
  • The three dimensions of KYC

 

  • The KYC process
  • Inputs: customer information
  • Core customer due diligence
  • Risk based approach to CDD

 

  • Identifying the customer
  • Establishing the capacity and understanding profile

 

  • Establishing the acceptability of the relationship
  • Due diligence
  • Identyfying factors and customer acceptance
  • Summary

 

  • Creating a Structured KYC file
  • Elements of the KYC file
  • Electronic records
  • Cohesiveness of the KYC file

 

Identification and Verification

  • Introduction
  • Why is ID&V so important?

 

  • Customer identification
  • Overview
  • Identification requirements in the wholesale environment

 

  • Verification
  • Overview
  • Sources of verification
  • Independence and reliability
  • Validity
  • Summary
  • Certification
  • Information provided by the customer and questionnaires
  • Verification and risk factors

 

  • ID&V in practice
  • Consolidating ID&V requirements – the ID&V Matrix
  • Commonly accepted sources of information
  • Company registrars
  • Regulators and Stock exchanges
  • Official company material
  • Specialized data vendors
  • Market Utilities

 

Understanding the customer

  • Who is the customer?
  • Why is understanding the customer so important
  • Establishing the customer’s identity
  • Private individuals
  • The customer’s name(s)
  • The customer’s address (registered, business) and domicile
  • The legal form of the customer
  • Limited companies
  • Partnerships
  • Trusts
  • Other legal forms
  • Entity Identifiers
  • The parent / group to which the customer belongs
  • The nature of the customer’s business
  • The customer’s regulatory status
  • The customer’s business activities
  • Industry risk
  • Industry classifications
  • The customer’s geographical footprint
  • The customer’s client base
  • The standing of the customer in its industry
  • Verification requirements
  • Customer types
  • Financial institutions
  • Corporates
  • Government and public sector

 

 

Understanding the relationship

• The role of the customer in the relationship

  • Principal - agent relationships
  • The role of intermediaries
  • Correspondent banking
  • Current accounts and currency clearing services
  • Brokerage services
  • Securities custody services
  • Risks and due diligence measures
    • Due diligence measures
    • Transaction monitoring
  • The cost of getting it wrong

• The role of the customer in complex financial transactions

  • Syndicated lending
  • Acquisition Finance, Leveraged Acquisitions

• The nature, purpose and context of the relationship

  • Establishing the purpose of the relationship
  • Risk Management
  • Consistency with nature of business
  • Ongoing monitoring
  • Suitability and Appropriateness
  • Understanding the context of the relationship
  • Length of the relationship
  • Identifying the account owner
  • The coverage model
  • Multinational clients
  • Cross-border activities
  • Identifying other relevant parties
  • Identifying Existing relationships

• Source of Funds & Source of Wealth

  • Definition and purpose
  • Scope of application
  • Identification requirements
  • Source of Funds
  • Source of Wealth
  • Verification requirements
  • Risk Assessment
  • Risk factors related to SoF/SoW
  • Consistency with nature of business
  • Politically Exposed Persons
  • Management of risk factors

 

Beneficial Ownership

• Overview

  • Regulatory obligations
  • Beneficial ownership definitions and thresh[1]olds
  • Exemptions for Simplified Due Diligence
  • Enhanced Due Diligence requirements
  • Why is beneficial ownership so important?

• Beneficial owners and legal forms

  • Companies
  • Partnerships
  • Trusts
  • Funds
  • Charities and Foundations
  • Other legal forms, partnerships, trusts

• Identifying beneficial owners

  • Unwrapping the beneficial ownership of legal persons
  • How far to go and where to stop: SDD entities
  • Free float of listed companies
  • Multiple private owners with no beneficial ownership
  • Aggregating ownership and identifying beneficial owners
  • Importance of aggregation
  • Multiple private owners with collective control
  • Family ownership
  • Meeting the beneficial ownership threshold
  • Intermediate owners
  • Legal forms and beneficial ownership drill-down
  • Risks associated with intermediate owners
  • Ownership charts
  • Benefits of ownership charts
  • Identification requirements for beneficial owners
  • Identification requirements for intermediate owners

• Verification requirements

  • Verifying the ownership structure
  • EU beneficial owners’ repository project
  • Verifying the individual identity of beneficial owners
  • Challenges with verification of individual identities
  • Verifying the SDD status of intermediate owners when the drill-down stops

• Other technical considerations

  • Individuals with effective control
  • Beneficial ownership vs. parent company
  • Beneficial ownership for high risk subsidiaries
  • Preference shares and voting rights

• Risk management

  • ⸰ Screening
  • ⸰ Risk factors related to beneficial owners
  • ⸰ Country risk
  • ⸰ Business activities
  • ⸰ Source of Wealth
  • ⸰ Bearer shares
  • ⸰ Nominee shareholders
  • ⸰ Private investment vehicles / companies
  • ⸰ Risks related to the ownership structure
  • ⸰ Intermediate owners
  • Joint ventures and recently acquired companies
  • Overly complex ownership structures

 

Understanding the control structure of the entity

• Overview

  • Definitions
  • Exemptions for simplified due diligence
  • Enhanced due diligence requirements
  • Why is the control structure so important?
  • Controllers and beneficial owners

• Control structures and the identification of controllers – Called Legal forms, control structures and IDV of controllers

  • Companies
  • Individual controllers
  • Owners with effective control
  • Controllers with ownership
  • Multiple control points
  • Control by groups of persons
  • Funds
  • Other legal forms
  • Partnerships
  • Trusts
  • Public authorities
  • Charities and Foundations
  • Public authorities
  • Private equity funds
  • Private investment vehicles/companies
  • Sovereign Wealth Funds
  • Special Purpose Vehicles (SPVs)
  • Legal persons as controllers
  • Where to stop: SDD
  • Other relevant control or advisory bodies
  • Advisory boards
  • Shariah boards
  • ID&V requirements
  • Private person controllers
  • Legal person controllers

• Risk factors

  • Screening
  • Risk related to controllers
  • Nominee directors
  • Complex ownership structures

 

Customer screening

• Overview

  • Screening universe
  • Sanctions
  • Politically Exposed Persons
  • Adverse media
  • Internal watch lists
  • Scope of parties included in screening
  • Customer vs. Payments screening vs. Transaction’s monitoring
  • Why is screening so important?

• Sanctions and PEPs

  • ⸰ The sanctions regime
  • ⸰ Politically Exposed Persons
  • ⸰ Reputation Risks

• Performing screening

  • Matching customer records
  • Screening vs. re-screening
  • The matching process
  • No hit returns
  • True vs. False positives
  • Matching optimization
  • Completeness of customer records
  • Rules tuning
  • Universe of media content

⸰ Key words

⸰ Length of history and relevance

⸰ Range of media and language

  • Discounting false positives
  • Managing true positive hits
  • Sanctions hits
  • Politically Exposed Persons
  • Adverse Media

⸰ Age

⸰ Reliability

⸰ Relevance

⸰ Materiality

  • Internal watch lists
  • Applying existing screening results
  • Identifying CDD areas concerned by the results
  • Immediate MLRO review
  • Documenting the outcome of screening
  • Consolidated screening report

 

Risk acceptance

• Overview

  • Risk assessment and acceptance
  • Mandatory measures vs. risk-based assessment
  • Prohibited relationships
  • Enhanced Due Diligence obligations (EDD)
  • Risk-based approach to CDD

• Risk Acceptance

  • AML risk factors
  • Risk factors and scale of severity
  • Product risk
  • Politically Exposed Persons (PEP)
  • Risk rating
  • Decision tree models
  • Cumulative models
  • Benefits and limitations
  • Risk weighted models
  • Iterative nature of the risk rating process
  • Risk analysis and referrals
  • Existing customers
  • Ongoing monitoring
  • Re-screening
  • Periodic renewals
  • Event-driven reviews
  • New products

• Risk mitigation and Ownership

  • Risk mitigation
  • Product limitations
  • Increased monitoring
  • Refusals and terminations
  • Risk ownership
  • Role of the relationship manager
  • Customer acceptance committees
  • Senior management ownership
  • Role of the MLRO
  • Documenting the risk ownership

• Future developments

  • The fourth Money Laundering directive
  • Customer regulatory classifications
  • MiFID
  • EMIR and Dodd Frank
  • FATCA

 

Enhanced Due Diligence

• Enhanced Due Diligence measures

  • Identification and Verification
  • Understanding the customer
  • Understanding the relationship
  • Beneficial owners and controllers
  • Screening
  • Risk acceptance

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