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Are you outsourcing Customer Due Diligence? Read the guidance update.

New Zealand Supervisors issue a reminder for outsourcing Customer Due Diligence to third parties.

The Financial Markets Authority and Department of Internal Affairs recently released updated guidance on outsourcing Customer Due Diligence that reiterates a very important message for anyone using third parties to manage it.

The updated guidance reminds businesses that outsourcing Customer Due Diligence (CDD) to third parties, while useful and time-saving, doesn’t exist in isolation of the wider Anti-Money Laundering (AML) obligations. In other words, CDD is just one aspect of AML compliance, and businesses must make sure they are meeting all their AML obligations.

It is clear the Supervisors have come across a lot of reporting entities that have thought that, by outsourcing Customer Due Diligence to a third party, the third party “just takes care of it all”. The Supervisors expressly declare that “this is not the case”.

Know your Customer Due Diligence responsibilities

It is each business’s responsibility to check the work of a third party to ensure it meets the standards of the Anti-Money Laundering/Countering the Financing of Terrorism Act (AML/CFT Act), and that does require each business to have in-house expertise to be able to assess that.

Furthermore, businesses must store, have access to, and review their Customer Due Diligence regularly to make sure their customer information on-hand is up-to-date. This is not just to make sure that CDD is conducted thoroughly, but that the nature and purpose of each transaction (in the context of transaction monitoring) is captured at all times.

In addition, under the Act, organisations retain responsibility for their Customer Due Diligence and this liability cannot be outsourced to third parties. So, if third parties drop the CDD ball, the consequences will come back to the business.

Customer Due Diligence is easier than you thought

The good news is Customer Due Diligence is quite simple to doif you have the right tools and systems in place. Around 80% of CDD cases are easy and fast for businesses to do themselves and owning the CDD process in-house has the benefit of peace-of-mind around Anti-Money Laundering compliance.

At AMLHUB, we’ve helped over 300 reporting entities take control of their Customer Due Diligence without adding additional time to the verification process. Using the AMLHUB app, our customers can onboard and verify clients quickly and efficiently. It takes the same amount of time (or less!) than it would take to outsource to a third party, at a lower cost, and with greater control of the judgement calls often required.

For cases that are highly complex or time-consuming, there are benefits to outsourcing Customer Due Diligence to a third party. AMLHUB offers the option to outsource such cases at the push of the button. Our outsource partners quickly and thoroughly conduct the CDD for you, and load it into your AMLHUB account, providing transparency and the required audit trail. In addition, AMLHUB allows you to set client review periods and reminders for active clients, based on their level of risk, making ongoing CDD as easy as possible.

Take control of your Customer Due Diligence

Anti-Money Laundering compliance comes with obligations to be sufficiently trained, retain liability, and maintain proper records. This does require your business to have sufficient in-house expertise. The AMLHUB hybrid model of empowering you to take control of your Customer Due Diligence, while retaining the option to outsource when required, is the most efficient and compliant solution that is currently empowering over 300 of our clients to manage and meet their full suite of AML obligation.

Find out how AMLHUB can help you take control of your AML obligations quickly, easily, and at the lowest cost.

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