Monitoring a customer’s activities is a critical step in the CDD process. When should the firm undertake such monitoring?

Answer 1

Monitoring a customer's activities is a crucial part of the Customer Due Diligence (CDD) process. It is essential to ensure that the customer is not engaging in any suspicious activity or money laundering. Therefore, monitoring should be carried out regularly and throughout the customer's relationship with the firm.

The frequency and scope of monitoring should be based on the customer's risk profile, as determined during the initial CDD process. Higher-risk customers should be monitored more frequently and comprehensively than lower-risk customers.

The firm should undertake monitoring whenever there is a significant change in the customer's profile, such as a change in their business activity or ownership structure. Other triggers for monitoring could include unusual transactions or patterns of behavior that suggest potential money laundering or terrorist financing.

Overall, monitoring should be an ongoing process and a critical part of the firm's anti-money laundering (AML) and counter-terrorist financing (CTF) efforts.