Basel Committee's Principles on Customer Due Diligence

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According to the Basel Committee's principles on customer due diligence (CDD), a bank should obtain the information necessary to establish the identity of a customer, beneficial owners, and any person acting on behalf of the customer. This means that a bank must verify the identity of its customers and anyone associated with them. This includes collecting and verifying documents such as passports, driver's licenses, and utility bills.

The purpose of this requirement is to prevent money laundering and terrorist financing by ensuring that banks have a clear understanding of who their customers are and who is ultimately controlling their accounts.

In addition to obtaining customer information, banks must also monitor their accounts for suspicious activity. This means maintaining systems to detect transactions that are unusual or inconsistent with a customer's known activity, such as transactions involving large amounts of money, transactions to or from high-risk countries, or transactions that involve parties on watchlists or sanctions lists.

If a bank identifies suspicious activity, it must file a suspicious activity report (SAR) with the appropriate authorities. SARs are critical to the detection and prevention of money laundering and other illicit activities.

Finally, banks must refuse to conduct ongoing business with customers who fail to provide proper identification documentation. This is because without proper identification, it is impossible for a bank to conduct adequate customer due diligence and monitor for suspicious activity.

In summary, a bank's CDD program should include the following:

1. Obtaining customer information to establish identity
2. Monitoring accounts for suspicious activity
3. Filing SARs when appropriate
4. Refusing to conduct ongoing business with customers who fail to provide proper identification documentation.