What Is Enhanced Due Diligence?
When a customer or business is at a greater risk of money laundering, terrorist financing and other financial crimes, they should be given an increased degree of due diligence. Known as enhanced due diligence (EDD), this goes beyond the normal KYC and AML checks by collecting information outside the scope of normal KYC and AML.
This includes identifying the people and entities that have a connection to clients, such as the ultimate beneficial ownership (UBO), uncovering the source of wealth or funds, as well as business activity. It also investigates unexplained activities and transactions and investigates the underlying connections.
It’s an important element in fighting the financing of terrorists and criminals. However it’s important to remember that EDD should be analyzed on an individual basis. For example, a UK bank account opening with a clean passport, solid address history and no CCJs may only require CDD, whereas another customer may require EDD due the high quantity of cash deposits, or complex transactions.
The best way to determine whether EDD is necessary is to create a comprehensive risk analysis and screening framework. This should include both your internal controls as well as external factors such as adverse media, sanctions, political instability terrorist finance organized crime, money laundering and fraud.
Effective due diligence isn’t simply meeting regulatory requirements, or protecting 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 fast efficient, accurate, and affordable to achieve this.