Enhanced due diligence is a risk-based due diligence process that allows businesses to effectively handle transactions and customers with high risk while remaining compliant with the requirements of regulatory authorities. When properly implemented it shields businesses from serious legal penalties and reputational damage while ensuring that their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) processes are efficient in combating financial crime.
Most of the time, EDD is required when a customer or transaction is deemed high-risk due to complicated ownership structures, political exposure or involvement in industries susceptible to money laundering or financial crime. In addition any significant change in customer behavior, such as an increase in transaction volume or unfamiliar types of transactions could warrant an EDD. In addition, any transaction that involves an area or country which is at risk of money laundering or terrorism financing requires an EDD.
EDD is focused on identifying beneficial owners, and uncovers hidden risk factors, including the true beneficiaries of a particular account or transaction. It also detects suspicious and unusual patterns of behavior in transactions and confirms the information by independent interviews and checks, site visits and third-party verification. Additionally, a review of local market reputation via media sources and the existing AML policies complete the risk evaluation.
EDD is more than just a requirement to ensure compliance It’s an essential part of protecting the integrity of the global finance system. Implementing EDD procedures that are efficient is not just a matter for compliance. It’s an investment into the safety and security of the global financial system.