Simplified Due Diligence (SDD)¶
Definition¶
SDD (Simplified Due Diligence) is a reduced level of customer due diligence applied to customers assessed as low-risk. It allows financial institutions to apply lighter verification measures while still meeting minimum regulatory requirements.
When SDD is Permitted¶
| Low-Risk Indicator | Examples |
|---|---|
| Customer type | Government entities, listed companies, regulated financial institutions |
| Product type | Low-value prepaid cards (< €150), basic savings with low limits |
| Geography | Customer from low-risk, well-regulated jurisdiction |
| Transaction profile | Low-value, predictable, domestic transactions |
SDD vs Standard CDD¶
| Aspect | SDD | Standard CDD |
|---|---|---|
| Identity verification | Reduced — may accept fewer documents | Full document + biometric verification |
| Source of funds | Not required | May be required |
| Ongoing monitoring | Basic | Standard |
| Documentation | Minimal | Full |
| Risk assessment | Pre-determined as low | Individual assessment |
India-Specific: Small Accounts¶
RBI allows SDD for "Small Accounts":
| Parameter | Limit |
|---|---|
| Balance | ≤ ₹50,000 |
| Annual credits | ≤ ₹1,00,000 |
| Monthly withdrawals | ≤ ₹10,000 |
| KYC required | Self-certification + one OVD (no verification needed) |
| Validity | 12 months (then full KYC needed to continue) |
Important Limitations¶
SDD Does Not Mean No KYC
SDD is a reduced level — not an exemption. Key rules:
- Customer identity must still be established (though verification may be lighter)
- SDD is immediately upgraded to standard CDD or EDD if suspicion arises
- SDD cannot be applied if there's any indication of money laundering or terrorist financing
- The institution must be able to justify why SDD was applied
Key Takeaways¶
Summary
- SDD is the lightest level of due diligence for demonstrably low-risk customers
- Not an exemption — basic identity must still be established
- Immediately escalated if any suspicious activity is detected
- In India, SDD enables Small Accounts for financial inclusion (₹50K limit)
- Must be documented and justified — regulators will ask why SDD was applied