Enhanced due diligence is a risk-based due diligence process that allows companies to efficiently manage transactions and customers with high risk while remaining in compliance with the requirements of regulatory authorities. When properly implemented it shields companies from severe legal and reputational harm while ensuring that their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) processes are efficient in combating financial criminality.
Often, EDD is required when a customer or transaction is deemed high-risk due to complex ownership structures, political exposure, or involvement in industries susceptible to financial criminal activity. Additionally an important shift in the behavior of a customer like an increase in transaction volume or a change in the type of transactions could require an EDD. Finally, any transaction that involves a country or region that is more susceptible to money laundering and financing terrorism will require an EDD.
EDD is focused on identifying beneficial owners and revealing undiscovered risks, like the real beneficiaries of the transaction or account. It also identifies unusual and suspicious patterns of transactional activity and validates the information using independent checks and interviews, site visits and third-party verification. The risk assessment is completed by a thorough review of the local market’s reputation through media sources, as well as the current AML policy.
EDD isn’t only a requirement for regulatory compliance; it’s a crucial element of protecting the integrity of our global financial system. Implementing EDD procedures that work is more than a matter for compliance. It’s an investment into the safety and security the global financial system.
VDRs: the touchstone of excellence in business data management
