What is Ongoing Customer Due Diligence (OCDD) and Why Does It Matter?

As businesses grapple with the growing complexity of financial risks, staying on top of issues like money laundering and terrorism financing has become a crucial task. Ongoing Customer Due Diligence (OCDD) is key to ensuring compliance and reducing potential threats. It’s not just about initial checks – OCDD involves continuously monitoring customer activity to spot issues early, take action, and build stronger, more trusted relationships.

In this guide, we’ll cover the essentials of OCDD, its role in risk management, how technology is simplifying the process, and the regulations businesses must follow to stay compliant.

‍

Key Takeaways

OCDD is not just a box to tick—it’s a vital defence against financial crime and regulatory breaches. By embracing constant monitoring and cutting-edge technology, businesses can spot risks early, keeping both their compliance game and reputation intact.

• OCDD involves monitoring customer transactions and updating risk profiles throughout the business relationship.
• Automation with AI and machine learning improves efficiency and accuracy in detecting suspicious activity.
• Ongoing updates to customer information are required to meet global AML and CTF regulations.
• Non-compliance can lead to significant fines, reputational damage, and loss of business.

‍

What is OCDD?

Ongoing Customer Due Diligence might sound like a mouthful, but it’s simply about staying vigilant. Unlike the initial checks carried out when a customer first walks through the door, OCDD is the practice of monitoring and reassessing a customer's journey— making sure you’re not only aware of the risk when it starts but that you’re keeping an eye on any changes that could unfold along the way.

So, what does OCDD really involve?

• Identity Checks, Revisited: It’s not just about confirming who they are at the beginning— it’s about staying on top of that throughout the relationship.
• Risk Profiles That Evolve: As customers’ behaviour shifts, so too should their risk profile. OCDD keeps it fresh and relevant.
• Spotting the Unusual: It’s about tracking transactions, searching for any red flags that might hint at something amiss.
• Reporting Suspicion: When something doesn’t add up, it’s critical to flag it and report it to the right authorities— no delays.

In short, OCDD ensures you don’t just start the relationship on the right foot— you stay engaged, alert, and proactive throughout, keeping both your business and customers protected.

‍

Why is OCDD Necessary?

OCDD is now a fundamental part of running a responsible, future-proof business. And with regulators tightening the rules across the globe, you can't afford to take shortcuts:

Key reasons why OCDD is essential:

1. Compliance with Regulatory Requirements: Regulators like AUSTRAC in Australia and the Financial Action Task Force (FATF) don’t just suggest OCDD—they demand it. Businesses that fail to keep up with ongoing compliance risk facing serious penalties.
2. Proactive Risk Identification: By keeping an eye on customer activity, OCDD helps you identify potential risks early, allowing you to take action before things spiral out of control.
3. Protection Against Financial Crimes: Whether it’s money laundering, fraud, or terrorism financing, OCDD acts as a defence mechanism, catching suspicious activity that might otherwise slip through the cracks.
4. Building Customer Trust: Ongoing due diligence doesn’t just protect your business—it shows your customers that you care. By keeping their data up to date and ensuring everything is in compliance, you build trust and loyalty.

In short, OCDD isn’t just a regulatory checkbox—it’s a key part of protecting your business, your customers, and your reputation. Stay ahead of the curve, and turn compliance into a competitive advantage.

‍

Technology & Automation in OCDD

With the sheer volume of transactions and customer data businesses deal with daily, relying solely on manual processes is no longer viable to keep up with the demands of ongoing monitoring and regulatory requirements. Automated systems offer businesses a powerful way to stay compliant while reducing the strain on their teams.

‍

What Role Does Technology Play in Automating OCDD Processes?

In automating OCDD processes, technology has become a true game-changer. Artificial intelligence (AI) and machine learning (ML) tools are now capable of processing vast amounts of customer data in real-time, simplifying the detection of suspicious activity, identity verification, and updates to customer profiles.

Some key roles technology plays in OCDD automation include:

• Automated Identity Verification: Technology now automatically checks customer identities against government databases, watchlists, and trusted sources, ensuring compliance with KYC (Know Your Customer) regulations without delay.
• Transaction Monitoring: AI-driven systems are on the front line, scanning each transaction for signs of unusual activity. They can pick up on subtle anomalies, patterns, or behaviours that might indicate financial crime, generating alerts for compliance teams to dive deeper. 
• Risk Profiling: Technology doesn’t just passively track data; it assesses risk as it happens. By analysing transaction histories, geographical locations, and other key factors, businesses can keep customer profiles up to date in real time. 
• Regulatory Reporting: Automated systems generate reports and submit them to the relevant authorities without human intervention, significantly reducing the risk of errors and ensuring that compliance deadlines are always met.

‍

Why is Automated Ongoing Monitoring Necessary for OCDD?

Automated ongoing monitoring is vital for businesses to keep up with the ever-changing nature of customer behaviour and quickly spot shifts in risk levels. As financial crime evolves, customer activities can change in unpredictable ways, and manual monitoring struggles to keep up with the sheer volume and complexity of transactions.

The key benefits of automated ongoing monitoring are clear:

• Lower Compliance Costs: Automation lightens the load for compliance teams, helping businesses cut down on operational expenses.
• Scalability: With automated systems, businesses can process massive amounts of customer data without compromising the quality of their monitoring efforts.

What is Enhanced Customer Due Diligence (ECDD)

Enhanced Customer Due Diligence (ECDD) is an essential part of overall Customer Due Diligence (CDD), designed to provide a more thorough examination of high-risk customers or transactions. ECDD digs deeper into a customer’s background, activities, and the origins of their funds, all while assessing any potential risks they may pose to the business.

‍

‍What’s Involved in Rescreening a Customer?

Rescreening a customer means reviewing their transaction history and checking for any changes in their risk profile. This process also involves ensuring their details are still accurate and up to date. In some cases, it may require a more in-depth investigation, like tracking the source of funds, running background checks, or considering any new risk factors that may have cropped up since the last review.

‍

What Are Some Examples of Customer Changes That May Trigger a Reassessment of Their Risk Level in OCDD?

Several customer changes may trigger a reassessment of their risk level, including:

• Changes in Transaction Behavior: A sudden increase in high-risk transactions, such as large international transfers, may indicate suspicious activity.
• Changes in Ownership or Control: If a customer changes their business ownership structure or key management personnel, it could indicate potential risks.
• Changes in Jurisdictions: If a customer moves operations to a higher-risk jurisdiction, it may warrant a reassessment of their risk profile.

‍

Compliance & Penalties

For businesses in regulated industries such as financial services, gaming, and payments, complying with OCDD is not optional—it's essential. Authorities worldwide have rolled out stringent requirements for monitoring customer activity to combat financial crimes. Failing to meet these standards can lead to hefty fines, the loss of operating licences, and long-lasting harm to a business’s reputation.

‍

What Are the Global Regulatory Requirements for OCDD?

Around the world, regulations demand that businesses carry out OCDD as a core part of their Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) efforts. Here's a look at some of the key frameworks:

• Financial Action Task Force (FATF): FATF establishes global AML and CTF standards, insisting on continuous transaction monitoring and regular customer profile updates. Their recommendations stress the need to tailor OCDD practices to each customer’s risk level.
• European Union (EU) Anti-Money Laundering Directive (AMLD): The EU requires ongoing monitoring of customer transactions, periodic updates to customer data, and enhanced due diligence (EDD) for higher-risk individuals. The 5th AMLD extended these obligations to virtual asset service providers (VASPs).
• AUSTRAC (Australia): In Australia, AUSTRAC mandates financial businesses to monitor transactions continuously, update customer identification, and take a risk-based approach to monitoring.
• The Bank Secrecy Act (BSA) and USA PATRIOT Act (United States): The BSA, enforced by FinCEN, compels U.S. financial institutions to implement OCDD, which includes regular risk assessments and continuous monitoring for suspicious activity. The USA PATRIOT Act broadened the scope, covering more institutions.
• Financial Conduct Authority (FCA, UK): The UK’s FCA enforces OCDD under the Proceeds of Crime Act (POCA) and the Money Laundering Regulations (MLR), which require businesses to undertake enhanced due diligence for high-risk clients.

These regulations form the foundation of OCDD requirements across the globe. Non-compliance is costly and can have far-reaching consequences.

‍

What Are the Penalties for Failing to Implement OCDD?

Non-compliance with OCDD regulations can lead to a range of serious penalties, including:

• Fines: Businesses can face hefty financial penalties for failing to adhere to OCDD regulations.
• Suspension of Operations: Companies risk having their operations halted or, in extreme cases, their licences revoked.
• Damage to Reputation: Non-compliance can result in public scandals, loss of customer trust, and long-lasting harm to a business’s reputation.

The consequences of not implementing effective OCDD systems are far-reaching, as demonstrated by a few high-profile examples:

• Commonwealth Bank of Australia (2018) - $700 Million Fine: The bank was penalised for not reporting 53,000 suspicious transactions. Its OCDD processes were found lacking in identifying and escalating these activities, leading to a massive financial fine.
• Wells Fargo (2020) - $3 Billion Fine: The bank was fined for creating millions of unauthorised accounts to meet sales targets. Weak OCDD controls failed to detect the fraud, leading to major fines, leadership changes, and reputational damage. 
• TD Bank (2025) - $3 Billion Settlement: TD Bank faced a hefty fine for shortcomings in its anti-money laundering systems. It failed to report suspicious transactions amounting to hundreds of millions of dollars, attracting regulatory scrutiny and severe financial repercussions.

These real-world examples illustrate just how costly it can be to neglect OCDD. It’s not just about fines; it’s about the very survival of your business. Without robust due diligence systems, you risk falling victim to penalties that can devastate your operations and reputation.

‍

Conclusion

Ongoing Customer Due Diligence (OCDD) is essential for businesses to fight financial crime, ensure compliance, and protect their reputation. A strong OCDD system, powered by technology and aligned with global regulations, helps businesses manage risk and build trust.

Failing to comply isn’t just risky—it’s costly. Regulatory bodies have high standards, and non-compliance can lead to hefty fines and lasting reputational damage, as seen with Wells Fargo and TD Bank. Investing in effective OCDD systems is more than a requirement; it’s a vital step in safeguarding your business and maintaining customer confidence.