Enhanced due diligence is a due diligence based on risk process that empowers businesses to effectively handle transactions and customers that are high-risk while remaining compliant with the regulations. When implemented correctly, enhanced due diligence protects businesses against significant reputational and legal penalties while ensuring their Anti-Money Laundering and Customer Due Diligence processes are effective at combating financial criminals.
Typically, EDD is required when the transaction or customer is classified as high-risk due complex ownership structures, political exposure or involvement in industries prone to money laundering or financial criminal activity. Additionally, a significant change in customer behavior for example, an increase in the volume of transactions or unfamiliar types of transactions could warrant an EDD. Additionally, any transaction that involves a country or a region with a higher risk of money-laundering or terrorism financing will require an EDD.
EDD focuses on the identification of beneficial owners and uncovering hidden risks like the real beneficiaries of the transaction or account. It also detects unusual or suspicious patterns in transactions, and verifies information through independent checks, interviews, site visits and third-party verification. Additionally, a examination of the reputation of local markets through media sources and current AML policies are also part of the risk assessment.
EDD isn’t only a regulation requirement; it’s an essential part of protecting the integrity of our global financial system. Implementing EDD procedures that work is more than a matter for compliance. It’s an investment in the safety and security the global financial system.
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