Enhanced due diligence (EDD) is a type of risk based due diligence that allows businesses to manage high-risk transactions and customers while remaining compliant with the regulations. When implemented correctly, enhanced due diligence shields businesses against significant damage to https://warpseq.com/principle-moments-of-data-room-provider-comparison/ reputation and legal sanctions while ensuring that their Anti-Money Laundering and Customer Due Diligence procedures are effective in combating financial crimes.
In most cases, EDD is required when the transaction or customer is deemed to be high-risk due to complicated ownership structures, political exposure or involvement in industries that are susceptible to money laundering or financial criminality. A significant change in customer’s behavior such as an increase in volume of transactions or the introduction of new types of transactions may be a reason for an EDD. In addition, any transaction that involves any region or country that poses higher risks of financial terrorism and money laundering requires an EDD.
EDD is focused on the identification of beneficial owners, revealing hidden risk factors such as the real beneficiaries of a particular account or transaction. It also detects unusual and suspicious patterns of behavior in transactions and validates the information with independent checks and interviews, site visits and third-party confirmation. The risk assessment is completed by a thorough examination of the local market’s reputation, based on media sources, as well as an existing AML policy.
EDD is not only a regulation requirement; it’s an essential part of safeguarding the integrity of global financial system. Implementing EDD procedures that are effective is more than just an issue of compliance. It’s an investment in the security and safety of the global financial system.
