Which item is a key component of CDD?

• A. Verify Identity
• B. Negotiate
• C. File taxes
• D. Market research

Answer: (A)

Knowing who the customer is through identity verification is central to Customer Due Diligence. Verifying identity establishes the true who behind an account, which is the foundation for assessing risk, determining what level of scrutiny to apply (standard vs enhanced due diligence), and enabling ongoing monitoring for suspicious or unusual activity. Without confirmed identity, you can’t reliably assess risk or monitor behavior over time.

The other items listed aren’t part of CDD. Negotiating terms is a business activity, filing taxes concerns tax reporting, and market research is about understanding markets; none of these directly establish or verify who you’re doing business with or support ongoing risk-based monitoring.