Customer Due Diligence (CDD) refers to the set of procedures financial institutions and payment providers use to verify a customer's identity and evaluate their risk profile. In the merchant onboarding context, CDD includes both KYC (Know Your Customer) and KYB (Know Your Business) measures, making it the broader framework that governs initial and ongoing assessments of a customer’s trustworthiness.

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CDD typically involves gathering and validating identifying information, understanding the merchant’s business model, and checking for red flags like past financial misconduct or regulatory issues. Based on the level of perceived risk, providers may escalate to Enhanced Due Diligence (EDD) is a more in-depth review process for high-risk merchants. EDD might include collecting additional documentation, conducting deeper background checks, or monitoring transactions more closely, especially if the merchant operates in a regulated or high-risk sector.

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In essence, CDD ensures that businesses and individuals allowed into the payment ecosystem are properly vetted and continuously assessed to prevent exposure to financial crimes, fraud, or reputational damage. It is a dynamic, risk-based process that scales in rigor based on the customer’s risk profile.

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