Customer Due Diligence for the prevention and detection of money laundering and terrorist financing includes:

• A. I only.
• B. II only.
• C. II and III only.
• D. I, II and III.

Answer: (D)

Customer due diligence (CDD) for preventing and detecting money laundering and terrorist financing relies on three interrelated activities. First, identify and verify who the customer is, so you’re not dealing with someone using a false or stolen identity. This foundation makes sure you know exactly whom you’re doing business with. Second, understand the nature and purpose of the business relationship, collecting information about expected activities and the source of funds, so you can assess risk and determine appropriate controls from the outset. Third, monitor the customer’s transactions and behavior on an ongoing basis, updating the risk assessment as the relationship evolves and flagging any suspicious activity.

All three elements work together to create a robust CDD framework: verification establishes identity, understanding purpose informs risk, and ongoing monitoring ensures continued vigilance. If you skipped any one of these parts, you’d weaken the system—hence the correct answer includes all three. Enhanced due diligence may apply for higher-risk cases, but it builds on these same three components.