Enhanced due diligence (EDD) is a type of risk based due diligence process that permits companies to manage high-risk transactions and customers while still complying with 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) processes are effective in combating financial criminality.
EDDs are generally required when a particular transaction or customer is deemed to be high risk because of complex ownership structures or political risk. They can also be required if the customer is in a field that is prone to financial crime or money laundering. In addition any significant change in customer behavior like an increase in volume of transactions or the nature of transactions that are not well-known might require an EDD. Finally, any transaction that involves a country or region that is more susceptible to money-laundering or terrorism financing is likely to require an EDD.
EDD concentrates on identifying beneficial owners, while revealing risk factors such as the real beneficiaries of a particular account or transaction. It also detects suspicious or unusual patterns in transactional behaviour, and verifies information through independent checks and interviews, website visits and third-party verification. The risk assessment is carried out by a thorough examination of the local market’s reputation using media sources, as well as the current AML policy.
EDD isn’t only a requirement for regulatory compliance; it’s an essential part of safeguarding the integrity of the global financial system. Implementing EDD procedures that are effective is more than an issue of compliance. It’s an investment in the safety and security the global financial system.
VDRs: the touchstone of excellence in business data management
