Enhanced due diligence is a due diligence based on risk process that empowers businesses to effectively handle high-risk customers and transactions while still adhering to the regulations. When properly implemented, enhanced due diligence protects businesses against significant damage to reputation and legal sanctions while ensuring their Anti-Money Laundering and Customer Due Diligence processes are effective at combating financial crimes.
EDDs are generally required in cases where a transaction or a customer is deemed to be high risk due to complex ownership structures or political risk. They could also be required if the customer is involved in a field that is prone to financial crime or money laundering. A significant change in the customer’s behavior, for example, an increase in volume of transactions or new kinds of transactions could also require an EDD. Finally any transaction that involves a particular country or area with a higher risk of money-laundering or terrorism financing will require an EDD.
EDD concentrates on the identification of beneficial owners and uncovering hidden risks like the true beneficiaries in the transaction or account. It also detects suspicious or unusual patterns in transactions, and validates information with independent checks or interviews, visits to sites and third-party verification. The risk assessment is completed by a review of the local website market’s reputation through media sources, and existing AML policy.
EDD isn’t only a regulation requirement; it’s an essential element in protecting the integrity of the global financial system. Implementing efficient EDD procedures is not just a matter of compliance–it’s an investment in the safety and security of the global financial system.