CDD vs KYC vs EDD: The Compliance Lifecycle

Customer Due Diligence (CDD), Know Your Customer (KYC), and Enhanced Due Diligence (EDD) are often used interchangeably, but they represent distinct phases and depths of investigative work in the anti-money laundering (AML) lifecycle.

1. Know Your Customer (KYC)

KYC is the initial step—the "who are you?" phase. It involves collecting basic identity information (name, DOB, address) and verifying it against official documents.

2. Customer Due Diligence (CDD)

CDD is the ongoing process that includes KYC but goes further to understand the "what and why." What are the client's expected transaction patterns? Why are they opening this account? Who are the Ultimate Beneficial Owners (UBO)?

3. Enhanced Due Diligence (EDD)

EDD is triggered when a customer presents a higher-than-normal risk profile, such as Politically Exposed Persons (PEPs) or clients from high-risk jurisdictions. It requires deeper investigation into the Source of Wealth (SoW) and Source of Funds (SoF).

Understanding these lifecycles is critical for building a robust risk-based approach that satisfies both regulators and operational efficiency.