Due diligence is required when a client or business is at greater risk of money laundering, terrorist financing, and other financial crimes. Also known as enhanced due diligence (EDD) which goes beyond the standard KYC and AML checks by obtaining information beyond the scope of the standard checks.
This involves identifying the people and entities behind your customers, including ultimate beneficial ownership (UBO) and identifying the real source of wealth, money and business activity. It also investigates illogical transactions and actions and investigates the underlying connections.
It’s a key element in fighting the funding of terrorists and criminals. It’s important to remember that EDD is a security measure that should be used on a case by case basis. For example, an account opening in the UK with an unblemished passport, solid address history and no CCJs may only require CDD. But, another customer might require EDD due to a high volume of cash deposit or more complicated transactions.
The best method to determine if EDD is needed is to create a comprehensive risk analysis and screening framework. This should include both internal controls as well as external factors such a negative media, political warpseq.com instability and sanctions, terrorism financing and organized crime as well as fraud.
Effective due diligence isn’t just about satisfying regulatory requirements or protecting your brand’s reputation. It’s about having a positive impact on the fight against worldwide crime. You require an identity verification and EDD system that is fast, accurate, and cost-effective to achieve this.