Enhanced due diligence is a due diligence based on risk process that allows businesses to effectively manage transactions and customers that are high-risk while still adhering to the regulations. If properly implemented enhanced due diligence safeguards businesses from serious reputational and legal penalties while ensuring that their Anti-Money Laundering and Customer Due Diligence processes are effective at combating financial criminals.
EDDs are often required in cases where a transaction or a customer is deemed high risk due to complex ownership structures or political risk. EDDs may also be required if the customer is involved in a field that is susceptible to financial crime or money laundering. Additionally an important shift in the behavior of a customer, such as an increase in volume of transactions or unfamiliar types of transactions could warrant an EDD. Additionally, any transaction that involves any region or country that is more prone to financial terrorism and money laundering requires an EDD.
EDD concentrates on the identification of beneficial owners, uncovering hidden risks, such as the real beneficiaries of a bank account or transaction. It also detects unusual or suspicious patterns in transactions, and then validates the information using independent checks and interviews, website visits and third-party verification. A examination of the reputation of local markets through media sources and existing AML policies round out the risk assessment.
EDD is not only a regulation requirement; it’s an essential component of protecting the integrity of the global financial system. Implementing effective EDD procedures is not just a matter to be complied with, it’s an investment in the security and safety of the global financial system.
