Enhanced Due Diligence
enhanced due diligence (EDD) is a risk based due diligence system that enables companies to manage high-risk transactions and customers while still complying with the laws. If implemented correctly enhanced due diligence can protect businesses from serious reputational and legal penalties while ensuring that their Anti-Money Laundering and Customer Due Diligence procedures are effective in combating financial crimes.
EDDs are usually required in cases where a transaction or a customer is classified as high risk due to complicated ownership structures or political risk. They could also be required when the customer is involved in an industry that is prone to financial crime or money laundering. A significant change in customer’s behavior, like an increase in volume of transactions or new kinds of transactions might also require an EDD. Additionally any transaction that involves a country or a region with a higher risk of money laundering and financing terrorism is likely to require an EDD.
EDD is focused on finding beneficial owners and identifying undiscovered risks, like the real beneficiaries of the transaction or account. It also detects unusual or suspicious patterns in transactional behaviour, and validates information with independent checks, interviews, site visits and third-party verification. The risk assessment is carried out through a review of local market’s reputation using media sources, as well as an existing AML policy.
EDD isn’t only a regulation requirement; it’s an essential element in protecting the integrity of our global financial system. Implementing efficient EDD procedures is not just a matter to be complied with, it’s an investment in the security and safety of the global financial system.