Enhanced due diligence is a due diligence based on risk process that empowers companies to efficiently manage transactions and customers with high risk while still adhering to the regulations. When properly implemented it shields businesses from serious 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 generally required in cases where a transaction or a customer is deemed high risk due to complicated ownership structures or political exposure. They could also be required if a customer is involved in an industry that is prone to financial crime or money laundering. Additionally there is a significant change in customer behavior like an increase in volume of transactions or the nature of transactions that are not well-known, may require an EDD. Also, any transaction involving an area or country with a higher risk of financial terrorism and money laundering requires an EDD.
EDD concentrates on identifying beneficial owners and revealing potential risks that are not obvious, such as the true beneficiaries in the transaction or account. It also identifies unusual or suspicious patterns in transactions, and validates information with independent checks, interviews, site visits, and third-party verification. A review of the local market’s reputation through media sources and existing AML policies are also part of the risk evaluation.
EDD is not just a legal requirement, it’s an essential part of safeguarding the integrity of global financial system. Implementing effective EDD procedures is not only a matter of compliance, it’s an investment in the safety and security of the global financial system.
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