enhanced due diligence (EDD) is a type of risk based due diligence that allows companies to manage high-risk transaction and customers while remaining compliant with the regulations. When properly implemented, enhanced due diligence protects companies from severe reputational and legal penalties while ensuring that their Anti-Money Laundering and Customer Due website Diligence processes are effective at combating financial criminals.
EDDs are often required when a customer or transaction is deemed to be high risk because of complex ownership structures or political exposure. They could also be required when the customer is involved in an industry that is susceptible to financial crime or laundering. In addition an important shift in the behavior of a customer, such as an increase in transaction volume or unfamiliar types of transactions might require an EDD. Additionally, any transaction that involves a country or region that is more prone to terrorist financing and money laundering requires an EDD.
EDD is focused on identifying beneficial owners and revealing potential risks that are not obvious, such as the true beneficiaries in a transaction or a account. It also detects unusual and suspicious patterns of transactional activity and validates the information using independent interviews and checks, as well as site visits and third-party confirmation. In addition, a examination of the local market’s reputation through media sources and existing AML policies round out the risk assessment.
EDD isn’t just a regulatory requirement; it’s a crucial element of protecting the integrity of the global financial system. Implementing EDD procedures that are effective is not just an issue of compliance. It’s an investment in the security and safety of the global financial system.
