When a company or client poses a higher risk of money laundering, terrorist financing, and other financial crimes, they must be subject to an increased level of due diligence. Known as enhanced due diligence (EDD) it goes beyond the standard KYC and AML checks by collecting information beyond the scope of the standard checks.
This includes identifying the people and entities behind your customers, such the transformative impact of VDRs in the financial sector as ultimate beneficial ownership (UBO) and identifying the source of wealth, money and business activity. It also investigates the underlying relationships and investigates unexplained transactions and activities that may indicate hidden risks.
It’s an important tool in the fight against criminal and terrorist financing. However it’s crucial to note that EDD must be considered on an individual basis. For instance, an account opening in the UK with an unblemished passport, solid address history, and no CCJs might only require CDD. But, another customer might require EDD because of a high volume of cash deposits or complicated transactions.
The best method to determine if EDD is needed is to establish a comprehensive risk analysis and screening framework. This should include both your internal controls as well as external factors like adverse media, political instability, sanctions as well as terrorism finance and organized crime, as well as money laundering and fraud.
Effective due diligence isn’t about just ensuring compliance with regulatory requirements or preserving brand reputation. It’s about having a real impact in the fight against criminality in the world. You require an identity verification and EDD system that is quick reliable, accurate, and cost-effective to achieve this.
