Certified Anti-Money Laundering Specialist (CAMS) 2025 – 400 Free Practice Questions to Pass the Exam

FATF Recommendation 5 emphasizes the importance of customer due diligence (CDD) measures for financial institutions. This requirement is central to helping institutions identify and understand their customers and the nature of their business relationships. Effective CDD involves verifying the identity of customers, understanding the purpose and intended nature of the business relationship, and conducting ongoing monitoring of the business relationship to detect suspicious activity. By ensuring that proper CDD is implemented, financial institutions can better assess risks associated with money laundering and terrorist financing and enhance their ability to prevent such activities.

This recommendation is part of the broader framework established by the Financial Action Task Force (FATF) to combat money laundering and terrorist financing. It provides clear guidance on how institutions should gather essential information about their customers and the transactions they engage in. Hence, implementing robust CDD measures is critical in establishing the legitimacy of funds, as well as in identifying potentially illicit activities early in the customer relationship process.