SDD, CDD, and EDD under Czech AML Law: How to Conduct Proper Client Due Diligence and Avoid Costly Mistakes
Since January 1, 2021, the Czech Republic has implemented the provisions of the 5th Anti-Money Laundering Directive (AMLD5) into national legislation. Act No. 253/2008 Coll., on Certain Measures Against the Legalization of Proceeds of Crime (commonly referred to as the AML Act), governs the obligations of obliged entities with respect to customer identification and the prevention of money laundering. At the heart of this framework is a risk-based approach to customer, which includes three escalating levels: SDD – Zjednodušená kontrola (Simplified Due Diligence); CDD – Standardní kontrola (Standard Due Diligence); EDD – Zesílená kontrola (Enhanced Due Diligence). The correct application of each level is essential not only for regulatory compliance, but also to protect businesses from reputational, financial, and supervisory risks. 1. Simplified Due Diligence (SDD) According to §13 of the AML Act, simplified due diligence (SDD) may only be applied when: The risk of...