Customer Due Diligence (CDD)

Customer Due Diligence is the process of collecting and verifying information about a customer to assess the risks associated with doing business with them. This involves understanding the nature of the customer's business and their expected financial behavior.

In the context of derivatives trading, CDD helps institutions determine if a user has the financial capacity and risk tolerance to engage in complex trading instruments. It also helps identify the beneficial owners of corporate accounts to prevent shell company abuse.

By performing thorough CDD, institutions can create a risk profile for each client, which informs the level of ongoing monitoring required. This process is a foundational requirement of AML frameworks globally.

It ensures that the platform is not being used by prohibited individuals or entities. Effective CDD practices protect the integrity of the market and minimize the potential for regulatory enforcement actions.

It is a proactive approach to risk management in a highly regulated environment.