Customer Due Diligence Requirements Explained: What Your Business Must Know in 2025

As financial crime risks grow, understanding Customer Due Diligence (CDD) requirements has become crucial for businesses in Egypt in 2025. CDD plays a vital role in preventing money laundering and terrorism financing, and companies must stay compliant with evolving regulations to avoid legal and financial penalties.

In Egypt, businesses in various sectors—from banking to real estate and virtual assets—must navigate complex CDD laws that align with international standards, such as those set by the Financial Action Task Force (FATF). With increasing scrutiny on financial transparency, understanding what’s required for compliance is more important than ever.

This article provides an essential guide to Egypt's CDD regulations, offering businesses the insights needed to remain compliant, minimize risks, and operate securely in an increasingly regulated environment.

Understanding Customer Due Diligence (CDD)

Customer Due Diligence refers to the process of identifying and verifying the identity of customers, understanding the nature of their activities, and assessing the potential risk they pose to the financial institution. CDD is an essential part of Know Your Customer (KYC) procedures, which financial institutions must follow to mitigate risks related to fraud, money laundering, and financing of terrorism.

In Egypt, businesses, especially those in the financial sector, must perform CDD to comply with the Anti-Money Laundering (AML) laws and regulations set forth by both domestic authorities and international bodies. The Central Bank of Egypt (CBE), in coordination with other financial regulators, oversees these compliance efforts.

What Are the Customer Due Diligence Requirements Under Egypt's AML Law?

The Egyptian Anti-Money Laundering (AML) Law, passed in 2002 and updated in subsequent years, outlines the fundamental CDD requirements that financial institutions must follow. Under this law, businesses are required to gather key information about their customers to establish their identities and assess the risk they pose. This includes obtaining identification documents and understanding the nature of the customer’s business or activities.

CDD must be conducted during the onboarding process and whenever there are significant changes in the customer’s information. In Egypt, financial institutions must also keep records of customer transactions for a minimum period, enabling authorities to track suspicious activities and prevent money laundering.

What Are the Enhanced Due Diligence Requirements in Egypt?

Enhanced Due Diligence (EDD) is required when a customer presents a higher risk for money laundering or terrorism financing. This includes customers from high-risk countries, politically exposed persons (PEPs), or those involved in high-risk industries such as gambling or weapons trading.

In Egypt, businesses must conduct EDD if the customer’s profile suggests a higher level of risk. This may involve a more in-depth investigation of the customer’s background, sources of funds, business relationships, and ongoing monitoring of transactions. Businesses should adopt more stringent measures to verify and assess the legitimacy of high-risk customers to ensure they are not involved in illegal activities.

How Do Egyptian Banks Comply with CDD Regulations?

Egyptian banks play a critical role in ensuring that CDD regulations are adhered to. Banks are required to integrate CDD measures into their everyday operations and risk management systems. To comply with the law, banks in Egypt must perform the following:

• Customer Identification: Banks must verify the identity of customers before establishing a business relationship.
• Ongoing Monitoring: Transactions must be continuously monitored for suspicious activity, and unusual patterns must be reported to regulatory authorities.
• Record-Keeping: Banks must retain customer records and transaction details for a specified period to facilitate law enforcement investigations.
• Training and Awareness: Bank employees must receive training on identifying suspicious activity and complying with AML laws and CDD requirements.

In addition to complying with Egypt’s domestic AML regulations, banks must also align their practices with international standards, such as those set by the Financial Action Task Force (FATF).

What Does the Central Bank of Egypt Require for CDD Compliance?

The Central Bank of Egypt (CBE) provides clear guidelines on the CDD processes that financial institutions must follow. The CBE requires all banks to implement robust systems for customer identification, risk assessment, and monitoring of transactions. Additionally, the CBE mandates the following:

• Customer Risk Profiling: Financial institutions must assess the risk level of their customers based on factors such as their country of origin, business activity, and transaction history.
• Periodic Review: CBE requires institutions to perform periodic reviews of customer information, especially if there is a significant change in their business operations or behavior.
• Reporting Suspicious Activities: Banks must report suspicious activities promptly to the Egyptian Money Laundering and Terrorist Financing Combating Unit (EMLCU).

Adherence to these guidelines is necessary for maintaining CBE approval and avoiding regulatory sanctions.

How Does FATF Impact Customer Due Diligence in Egypt?

The Financial Action Task Force (FATF) is an international body that sets global standards for combating money laundering and terrorist financing. FATF’s recommendations, known as the FATF 40 Recommendations, are widely adopted by countries worldwide, including Egypt. These recommendations provide a framework for CDD and KYC compliance.

Egypt is a member of FATF and has aligned its CDD requirements with these international standards. As a result, businesses in Egypt must not only comply with national laws but also ensure their due diligence practices are consistent with FATF guidelines. This includes the implementation of measures such as:

• Enhanced Due Diligence for High-Risk Customers: FATF stresses the importance of EDD in situations where a customer poses a higher risk of being involved in money laundering or terrorism financing.
• Cross-Border Cooperation: FATF encourages international cooperation to track and prevent illicit financial transactions. Egypt, as a FATF member, must facilitate such cooperation.

The FATF’s influence means that businesses in Egypt must stay informed about global trends in money laundering and ensure their compliance systems are continuously updated.

How to Perform CDD for Virtual Asset Providers in Egypt?

With the rise of digital currencies and virtual assets, Egypt has recognized the need to regulate this growing sector. Virtual asset providers (VAPs), including cryptocurrency exchanges and wallet providers, must comply with CDD regulations under Egyptian AML laws.

To perform CDD for VAPs, businesses must:

• Verify the Identity: VAPs should confirm the identity of their users by requiring identification documents, such as passports or national IDs.
• Understand the Nature of Transactions: Since virtual assets often involve cross-border transactions, businesses must understand the purpose and source of funds involved.
• Ongoing Monitoring: Continuous monitoring of virtual asset transactions is essential to detect any suspicious activity, given the anonymous nature of many digital transactions.
• Report Suspicious Transactions: As with other financial institutions, VAPs must report any suspicious activity to Egypt’s regulatory authorities.

The Egyptian government has expressed intentions to strengthen regulations on virtual assets, meaning that VAPs must remain vigilant and proactive in their CDD efforts.

What’s the Difference Between KYC and Customer Due Diligence in Egypt Compliance?

While Know Your Customer (KYC) and Customer Due Diligence (CDD) are closely related and often used interchangeably, they serve distinct roles in Egypt’s compliance and anti-money laundering (AML) ecosystem.

KYC is the initial step in the customer onboarding process. It focuses on verifying the customer's identity using official documentation, such as a national ID, passport, or other government-issued credentials. The goal is to ensure that businesses and financial institutions are dealing with legitimate individuals or entities.

CDD, on the other hand, builds upon KYC by incorporating a deeper risk-based approach. It involves not only identifying the customer but also assessing the purpose of the relationship, the expected nature of transactions, and the overall risk profile of the customer. This includes reviewing the source of funds, business activities, and potential connections to politically exposed persons (PEPs) or high-risk jurisdictions.

In Egypt, both KYC and CDD are mandatory under AML regulations enforced by the Central Bank and the Money Laundering and Terrorist Financing Combating Unit (MLCU). However, CDD is broader in scope and continues beyond initial onboarding, requiring ongoing monitoring to detect any unusual or suspicious activity.

Conclusion

In 2025, as financial crime risks grow, understanding and implementing comprehensive Customer Due Diligence (CDD) practices will be more crucial than ever for businesses operating in Egypt. By following CDD regulations, businesses not only comply with local and international laws but also help safeguard the financial system from illicit activities.

Whether you are operating in the banking sector, real estate, or emerging industries such as virtual assets, ensuring proper due diligence will enhance your business’s credibility and protect you from severe penalties. Staying informed and adaptable to changes in regulations will be key to maintaining compliance in an increasingly regulated environment.

FAQs