Simplified Customer Due Diligence cannot be applied to which category of customer?

Simplified Customer Due Diligence cannot be applied to which category of customer?

• A. Politically Exposed Person
• B. Public body
• C. Another bank
• D. All of the above

Answer: (A)

The main idea here is that Simplified Customer Due Diligence is only appropriate for lower‑risk customers. Politically Exposed Persons are considered higher risk due to potential corruption or influence-peddling linked to holding or having held political power. Because of that elevated risk, Simplified CDD cannot be applied to them; they require Enhanced Due Diligence with more extensive checks, ongoing monitoring, and closer scrutiny of funds and sources of wealth. Public bodies and other banks are not automatically disqualified from Simplified CDD; they can be treated as lower risk in many cases depending on the risk assessment. That’s why they don’t fit the category that “cannot” have Simplified CDD applied. So the correct category is Politically Exposed Persons.

The main idea here is that Simplified Customer Due Diligence is only appropriate for lower‑risk customers. Politically Exposed Persons are considered higher risk due to potential corruption or influence-peddling linked to holding or having held political power. Because of that elevated risk, Simplified CDD cannot be applied to them; they require Enhanced Due Diligence with more extensive checks, ongoing monitoring, and closer scrutiny of funds and sources of wealth.

Public bodies and other banks are not automatically disqualified from Simplified CDD; they can be treated as lower risk in many cases depending on the risk assessment. That’s why they don’t fit the category that “cannot” have Simplified CDD applied. So the correct category is Politically Exposed Persons.