Which practice is used to assess a customer's identity and risk under the mitigation framework for new payment methods (NPMs)?

Which practice is used to assess a customer's identity and risk under the mitigation framework for new payment methods (NPMs)?

• A. Customer Due Diligence
• B. Limit loading, value and geographical limits
• C. Source of funding (limits on funding for specific product and identification when over account limits)
• D. Record-keeping, transaction monitoring and reporting

Answer: (A)

The main concept here is how to verify who a customer is and judge their risk level in light of new payment methods. Customer due diligence focuses on identifying the customer and understanding their risk profile before and during ongoing use of a payment method. It involves verifying identity with reliable sources, understanding the customer’s expected activity, ownership, and business purpose, and assessing risk factors such as geography and product type. For new payment methods, this risk-based assessment helps determine whether enhanced due diligence is needed or if standard checks are sufficient. Other controls like transaction limits or source-of-funding considerations play supporting roles, but the core practice for establishing identity and risk is customer due diligence.

The main concept here is how to verify who a customer is and judge their risk level in light of new payment methods. Customer due diligence focuses on identifying the customer and understanding their risk profile before and during ongoing use of a payment method. It involves verifying identity with reliable sources, understanding the customer’s expected activity, ownership, and business purpose, and assessing risk factors such as geography and product type. For new payment methods, this risk-based assessment helps determine whether enhanced due diligence is needed or if standard checks are sufficient. Other controls like transaction limits or source-of-funding considerations play supporting roles, but the core practice for establishing identity and risk is customer due diligence.