If a business or customer is at a greater risk of money laundering, terrorism financing, or other financial crimes, they need an additional level of due diligence. This is referred to as enhanced due diligence, which goes beyond standard KYC/AML checks to collect information outside the basic scope.
This includes identifying the people and entities that have a connection to customers, such as the ultimate beneficial ownership (UBO) and identifying the source of wealth as well as funds and business activities. It also probes underlying relationships as well as investigates unproven transactions and activities that could indicate hidden risks.
It’s a crucial tool in the fight against the financing of criminals and terrorists. It’s crucial to remember that EDD is a security measure that should be utilized on a enhanced due diligence case-by-case basis. For example, an account opening in the UK with a clean passport, a solid address history, and no CCJs might only require CDD. However, a different client could require EDD because of an excessive amount of cash deposit or more complicated transactions.
The best method to determine if EDD is needed is to design a thorough risk analysis and screening framework. This should cover both your internal controls as well as external factors such as adverse media as well as sanctions, political instability terrorist finance organized crime, fraud and money laundering.
Effective due diligence doesn’t rely on just meeting regulatory requirements or protecting brand reputation. It’s about making an impact on the fight against criminality in the world. To accomplish this, you need a fast accurate, reliable and cost-effective identity verification and EDD solution.