Enhanced due diligence is a due diligence based on risk procedure that allows businesses to effectively handle transactions and customers with high risk while remaining in compliance with the requirements of regulatory authorities. If properly implemented, enhanced due diligence shields businesses from serious reputational and legal damages while ensuring their Anti-Money Laundering and Customer Due Diligence processes are effective at combating financial crimes.
Most of the time, EDD is required when the transaction or customer is deemed to be high-risk because of complex ownership structures, political exposure or involvement in industries susceptible to money laundering or financial criminal activity. A significant change in the customer’s behavior, like an increase in the volume of transactions or the introduction of new types of transactions, may be a reason for an EDD. Lastly, any transaction involving any region or country that is more prone to financial terrorism and money laundering requires an EDD.
EDD focuses on finding beneficial owners and identifying potential risks that are not obvious, such as the true beneficiaries in the transaction or account. It also detects unusual and suspicious patterns of transactional behavior and validates the information with independent interviews and checks, as well as site visits, and homepage third-party confirmation. The risk assessment is completed by a thorough review of the local market’s reputation using media sources and the existing AML policy.
EDD is more than just an obligation to comply it’s a vital element safeguarding the integrity of the global financial system. Implementing effective EDD procedures isn’t only a matter of compliance, it’s an investment in the safety and security of the global financial system.
