Enhanced due diligence is a risk-based due diligence process that empowers businesses to effectively handle transactions and customers with high risk while remaining in compliance with the requirements of regulatory authorities. When implemented correctly, enhanced due diligence protects companies from severe legal penalties and reputational damages while ensuring that their Anti-Money Laundering and Customer Due Diligence processes are effective at combating financial criminals.
In most cases, EDD is required when a customer or transaction is classified as high-risk due to complex ownership structures, political exposure, or involvement in industries susceptible to money laundering or financial criminal activity. Additionally any significant shift in the behavior of a customer such as an increase in volume of transactions or the nature of transactions that are not well-known, may require an EDD. Lastly, any transaction involving the region or country which is at risk of financial terrorism and money laundering requires an EDD.
EDD focuses on identifying beneficial owners, revealing hidden risk factors such as the real beneficiaries of a particular account or transaction. It also identifies unusual or suspicious patterns of transactional behavior and confirms the information through independent checks, interviews, site visits and third-party verification. The risk assessment is completed through a review of local market’s reputation, based on media sources, and existing AML policy.
EDD is more than a requirement for compliance It’s an essential part in ensuring the integrity of the global finance system. Implementing EDD procedures that are efficient is not just an issue of compliance. It’s an investment in the safety and security the global financial system.