Enhanced Due Diligence
Enhanced due diligence is an essential aspect of AML compliance for companies that handle significant transactions or customers that are at risk of money laundering and other financial crime. It is used to eliminate the most dangerous clients and stop the funding of terrorist groups and other criminal organisations.
The EDD procedure is more thorough than regular due diligence and includes more checks. This involves collecting more identification documents and conducting thorough checks of a customer’s location and source of funds. This kind of due diligence is usually used for high-risk customers such as politically exposed individuals (PEPs) individuals who reside in countries with high risk as well as businesses or individuals that rely on cash.
The more complex a person, legal entity or transaction, the more thorough the EDD procedure should be. Regulators usually favor a risk-based method that makes use of documented risk assessment procedures to determine the level of scrutiny required for each individual case. The EDD procedure also requires more detailed information, such as information on the person’s clients suppliers, corporate/legal structures, and their clients. EDD processes are often more costly, time-consuming and require more documentation compared to CDD procedures. It is important to have an identity verification system that is both effective and efficient such as 1Kosmos BlockID to make the process more efficient for your business.
