Enhanced due diligence is a risk-based due diligence process that allows companies to efficiently manage high-risk customers and transactions while still adhering to the regulatory requirements. When implemented correctly it safeguards businesses from significant legal penalties and reputational damage while ensuring that their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) processes are effective in combating financial criminality.
EDDs are generally required when a transaction or customer is deemed high risk due to the complexity of 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 any significant change in customer behavior for example, an increase in volume of transactions or unfamiliar types of transactions, may require an EDD. Also, any transaction involving the region or country that is more prone to money laundering and terrorism financing requires an EDD.
EDD is focused on the identification of beneficial owners, and uncovers hidden dangers, like the real beneficiaries of a bank account or transaction. It also identifies suspicious or unusual patterns in transactions, and confirms the information through independent checks, interviews, site visits and third-party verification. Additionally, a review of local market reputation through media sources and current AML policies are also part of the risk assessment.
EDD is more than just a requirement to ensure compliance It’s an essential part in ensuring the integrity of the global financial system. Implementing EDD procedures that are effective is not just a matter for compliance. It’s an investment in the safety and security of the global financial system.
reshaping the contours of due diligence with VDR innovations