What Is Enhanced Due Diligence?
When a company or client poses a higher risk of money laundering, terrorist financing, and other financial crimes, they need an extra level of due diligence. This is known as enhanced due diligence, which goes beyond the standard KYC/AML checks in order to gather details that are not in the normal scope.
This involves identifying the people and entities behind your customers, like ultimate beneficial ownership (UBO) and identifying the source of wealth, funds and business activity. Additionally, it examines the relationship behind it and investigates suspicious transactions and activities that may signal hidden risks.
It’s an important tool to fight the financing of criminals and terrorists. However it’s important to remember that EDD is to be applied on a case-by-case basis. For instance for example, a UK bank account opening with a clear passport, a good address history and no CCJs might only require CDD, whereas another customer may require EDD due to the large quantity of cash deposits, or complex transactions.
The best method to determine whether EDD is needed is to establish a comprehensive risk analysis and screening framework. This should encompass both internal controls and external factors such a negative media, political instability, sanctions, financing of terrorism as well as organized crime and fraud.
Ultimately, effective due diligence isn’t just about meeting the requirements of regulatory agencies or protecting your brand reputation; it’s about making a difference on the fight against worldwide crime. You require an identity verification and EDD system that is fast efficient, accurate, and affordable to achieve this.
