For all customer types, LFIs are required to understand the purpose for which the account or other financial services will be used, and the nature of the customer's business. This element of CDD will have important implications for the customer risk rating. This is particularly true of the purpose of the account, which will likely be an essential determinant of risk for hawala provider customers. It is critical that LFIs have processes and controls in place to ensure that they are able to identify hawala customers. LFIs must ensure that they fully understand their customers' source of funds and the business in which they are engaged. In addition to interviewing the customer, requesting financial records, and reviewing invoices, LFIs should also search company databases and consider visiting the customer's business premises.

Underground hawala providers often try to evade detection by creating new companies and/or frequently switching to new financial institutions. In addition, even those that operate legally, may seek to misrepresent the purpose of the relationship in order to evade scrutiny and controls imposed by the LFI. It can be particularly difficult for an LFI to establish the bona fides and business activities of a newly established company, which is likely to not have any customers or inventory, especially when that company's line of business (e.g. import/export) is vague. LFIs should screen the names of new customer's beneficial owners, directors, and managers against its internal watchlists of customers previously exited by the LFI.

When a customer provides information indicating it is a hawala provider, LFIs must collect sufficient information during the CDD process to understand the full scope of the customer's business, including not only its provision of hawala services but also any other business activities in which the customer engages. LFIs should pay particular attention to the jurisdictions with which their hawala provider customers does business, and must understand whether their customer offers financial services to other hawala providers (e.g. participates in clearing networks or makes transfers on behalf of the customers of another provider who lacks a network in certain jurisdictions). Furthermore, LFIs must fully understand the intended use of the account and the expected activity on the account, to the extent that it can generally predict activity on the account and identify activity that does not fit the profile. This may be many small cash deposits followed by large cross-border transfers or volume of activity that does not fit the customer's business. They must also understand whether the hawala provider may be using the LFI's accounts to conduct business and to move funds on behalf of customers while attempting to conceal this activity from the LFI. Section 2.3.1 contains red flags for concealed activity.