Enhanced Due Diligence
Enhanced due diligence is a risk-based due diligence process that allows companies to efficiently manage transactions and customers at risk while remaining compliant with the requirements of regulatory authorities. When implemented correctly enhanced due diligence safeguards companies from severe legal penalties and reputational damages while ensuring their Anti-Money Laundering and Customer Due Diligence processes are effective at combating financial criminals.
In most cases, EDD is required when a customer or transaction is deemed high-risk due to complex ownership structures, political exposure or involvement in industries susceptible to money laundering or financial crime. A significant change in the customer’s behavior, for example, an increase in volume of transactions or new kinds of transactions could be a reason for an EDD. In addition, any transaction that involves any region or country that is more prone to money laundering and terrorism financing requires an EDD.
EDD concentrates on the identification of beneficial owners and uncovering potential risks that are not obvious, such as the true beneficiaries in an account or transaction. It also detects suspicious and unusual patterns of transactional behavior and validates the information with independent checks and interviews, site visits and confirmation from a third party. The risk assessment is completed by a thorough examination of the local market’s reputation using media sources, as well as an existing AML policy.
EDD is not just a regulatory requirement; it’s an essential component of safeguarding the integrity of the global financial system. Implementing EDD procedures that work is more than just a matter for compliance. It’s an investment into the safety and security the global financial system.