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Guidance

1. This Chapter prescribes the risk-based assessment that must be undertaken by a Relevant Person on a customer and the proposed business relationship, Transaction or product. The outcome of this process is to produce a risk rating for a customer, which determines the level of CDD that must be undertaken in relation to that customer under Chapter 8. Chapter 8 prescribes the requirements of CDD and of Enhanced CDD for high-risk customers and, where appropriate, Simplified CDD for low-risk customers.
2. CDD in the context of AML refers to the process of identifying a customer, verifying such identification and monitoring the customer's business and the potential for any money laundering risk on an on-going basis. CDD is required to be completed following a risk-based assessment of the customer and the proposed business relationship, Transaction or product.
3. Relevant Persons should note that the on-going CDD requirements in Rule 8.6.1 require a Relevant Person to ensure that it reviews a customer's risk rating to ensure that it remains appropriate in light of the potential money laundering risks.
4. The risk-based assessment of the customer and the proposed business relationship, Transaction or product required under this Chapter is required to be undertaken prior to the establishment of a business relationship with a customer. Because the risk rating assigned to a customer resulting from this assessment determines the level of CDD that must be undertaken for that customer, this process must be completed before the CDD is completed for the customer. The Regulator is aware that in practice there will often be some degree of overlap between the customer risk assessment and CDD. For example, a Relevant Person may undertake some aspects of CDD, such as identifying Beneficial Owners, when it performs a risk assessment of the customer. Conversely, a Relevant Person may also obtain relevant information as part of CDD which has an impact on its customer risk assessment. Where information obtained as part of CDD of a customer affects the risk rating of a customer, the change in risk rating should be reflected in the degree of CDD undertaken.
Added on (15 April, 2019).