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Customer due diligence and beneficial ownership

CDD requires identity verification, beneficial-owner determination, purpose understanding and ongoing monitoring proportionate to risk.

Finin2min summary

CDD requires identity verification, beneficial-owner determination, purpose understanding and ongoing monitoring proportionate to risk.

Source review date: 4 July 2026. Read with the official text and the facts of the transaction.

Legal anchors

  • Section 11A
  • Rule 9 and Digital KYC Annexure
  • RBI/SEBI/IRDAI or FIU sector guidance

How to analyse it

  1. Identify customer and authorised person.
  2. Trace natural-person beneficial owners.
  3. Understand purpose and expected activity.
  4. Apply enhanced due diligence to high risk.

Practical illustration

A private company is owned through two LLPs and an overseas trust. The reporting entity must identify ultimate natural-person ownership/control, not stop at the first corporate shareholder.

What can go wrong?

  • Threshold-only approach
  • No control analysis
  • Expired or inconsistent documents

Evidence pack

  • Ownership chart
  • OVDs and registry extracts
  • Purpose profile
  • Risk rating

Decision workflow

  1. Freeze the facts and effective date.
  2. Identify the controlling Act, rule, notification, circular and jurisdictional overlay.
  3. Prepare a calculation or exposure note.
  4. Collect the evidence pack before filing, payment, signing or response.
  5. Record reviewer conclusion and assumptions.

Quick Q&A

Is the result automatic?

No. Identify customer and authorised person.

What is the most important control?

Apply enhanced due diligence to high risk.

What should be escalated?

Threshold-only approach, especially where money, deadlines, enforcement, personal liability or irreversible transaction steps are involved.

Official source trail

Secondary commentary may help interpretation, but it is not the source of law.

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