FCA UK Regulation Exam Practice 2025 – Complete Preparation Guide

The primary obligation imposed by the FCA regarding customer due diligence (CDD) is that firms must identify and verify the identity of their customers. This requirement is essential for ensuring that organizations can prevent financial crime, such as money laundering and fraud. By verifying the identity of customers, firms can establish a clearer picture of who they are dealing with, assess the potential risks associated with these customers, and make informed decisions about the services they offer.

Know Your Customer (KYC) processes, which form part of CDD, involve collecting and verifying information such as the customer's name, address, date of birth, and other identifying details. This information not only helps protect the firm itself but also contributes to the integrity of the financial system as a whole.

Firms are mandated to carry out this verification accurately and maintain proper records over time, adapting their CDD measures to the risk profile of each customer. This approach ensures compliance with regulatory frameworks and helps safeguard against potential malicious activities that can arise from inadequate knowledge about customers.