Enhanced due diligence is a risk-based due diligence procedure that allows companies to efficiently manage high-risk customers and transactions while still adhering to the regulatory requirements. If properly implemented it protects companies from severe legal and reputational harm while ensuring that their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) processes are efficient in combating financial crime.
In most cases, EDD is required when a customer or transaction is deemed high-risk due to complicated ownership structures, political exposure, or involvement in sectors that are prone to money laundering or financial criminality. A significant change in the customer’s behavior, for example, an increase in the volume of transactions or new kinds of transactions may also require an EDD. Also, any transaction involving a country or region that poses higher risks of financial terrorism and money laundering requires an EDD.
EDD concentrates on identifying beneficial owners, while revealing risk factors, including the true beneficiaries of a transaction or an account. It also detects unusual or suspicious patterns in transactions, and confirms the information through independent checks and interviews, website visits, and third-party verification. The risk assessment is carried out through a review of local market reputation via media sources, as well as an existing AML policy.
EDD is more than just an obligation to comply It’s an essential part of protecting the integrity of the global financial system. Implementing EDD procedures that work is not just a matter for compliance. It’s an investment in the safety and security of the global financial system.
enhanced due diligence in banking sector analysis