Enhanced due diligence is a due diligence based on risk process that allows businesses to effectively manage transactions and customers with high risk while still adhering to the regulatory requirements. When properly implemented it shields companies from severe legal and reputational harm while ensuring that their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) procedures are effective in combating financial crime.
EDDs are typically required when a transaction or customer is deemed to be high risk due to complex ownership structures or political exposure. They can be required if the customer is involved in an industry that is susceptible to financial crime or money laundering. Additionally, a significant change in customer behavior for example, an increase in the volume of transactions or unfamiliar types of transactions might require an EDD. Finally, any transaction that involves a particular country or region that is more susceptible to money laundering or financing for terrorism will require an EDD.
EDD is focused on the identification of beneficial owners and uncovering undiscovered risks, like the real beneficiaries of a transaction or a account. It also detects unusual and suspicious patterns of transactional activity and validates the information with independent interviews and checks, as well as site visits, and third-party confirmation. The risk assessment is completed by a review of the local market’s reputation, based on media sources, and existing AML policy.
EDD is more than an obligation to comply It’s an essential part in ensuring the integrity of the global financial system. Implementing EDD procedures that work is more than just an issue of compliance. It’s an investment into the security and safety of the global financial system.