Enhanced due diligence (EDD) is a risk based due diligence system that enables companies to manage high-risk transaction and customers while remaining in compliance with the regulations. If implemented correctly, enhanced due diligence shields companies from severe reputational and legal damages while ensuring that their Anti-Money Laundering and Customer Due Diligence procedures are effective in combating financial criminals.
In most cases, EDD is required when the transaction or customer is classified as high-risk due to complex ownership structures, political exposure or involvement in sectors that are prone to money laundering or financial criminal activity. A significant change in customer’s behavior such as an increase in the volume of transactions, or the creation of new types of transactions, may be a reason for an EDD. Also, any transaction involving a country or region that poses higher risks of financial terrorism and money laundering requires an EDD.
EDD is focused on the identification of beneficial owners and uncovering undiscovered risks, like the real beneficiaries of an account or transaction. It also identifies unusual and suspicious patterns of transactional activity and confirms the information by independent interviews and checks, website visits, and third-party confirmation. The risk assessment is completed by a thorough examination of the local market’s reputation using media sources and the existing AML policy.
EDD is more than a requirement for compliance and is a crucial element safeguarding the integrity of the global financial system. Implementing EDD procedures that are efficient is more than just an issue Board Software of compliance. It’s an investment into the safety and security the global financial system.