A bank CANNOT apply Simplified Customer Due Diligence where the customer is: (i) another bank. (ii) a Politically Exposed Person. (iii) a public body.

• A. (iii) only.
• B. (ii) only.
• C. (i) and (ii) only.
• D. (i), (ii) and (iii).

Answer: (B)

The level of due diligence is tied to risk. Simplified CDD is used when the customer is considered low risk, allowing lighter verification steps. A counterparty that is another bank or a public body is typically treated as lower risk because both are regulated, have supervisory oversight, and clear governance and controls. In those cases, Simplified CDD can be appropriate if the overall risk assessment supports it.

A Politically Exposed Person, by contrast, is inherently higher risk due to potential political influence and opportunities for corruption. For PEPs, Simplified CDD would not be appropriate; enhanced due diligence is required, with more detailed information about wealth and sources of funds, ongoing monitoring, and senior-level oversight.

So the only scenario where Simplified CDD cannot be applied is when the customer is a Politically Exposed Person.