Enhanced due diligence is a risk-based due diligence process that allows companies to efficiently manage transactions and customers that are high-risk while remaining in https://warpseq.com/what-is-enhanced-due-diligence-bsa/ compliance with the regulatory requirements. When properly implemented it shields businesses from severe legal and reputational harm while ensuring that their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) procedures are efficient in combating financial criminality.
EDDs are typically required when a particular transaction or customer is deemed high risk due to complicated ownership structures or political risk. They could be required if the customer is involved in a field that is prone to financial crime or money laundering. Additionally any significant shift in the behavior of a customer for example, an increase in volume of transactions or the nature of transactions that are not well-known could warrant an EDD. Lastly, any transaction involving a country or region that poses higher risks of terrorist financing and money laundering requires an EDD.
EDD is focused on the identification of beneficial owners, and uncovers hidden risk factors, including the true beneficiaries of a transaction or an account. It also detects suspicious or unusual patterns in transactional behaviour, and then validates the information using independent checks or interviews, visits to sites, and third-party verification. In addition, a review of the local market’s reputation through media sources and existing AML policies complete the risk assessment.
EDD is not just a regulatory requirement; it’s an essential component of safeguarding the integrity of the global financial system. Implementing EDD procedures that are effective is more than a matter for compliance. It’s an investment in the safety and security the global financial system.