The Importance of Enhanced Due Diligence
For customers with high risk, the standard customer due diligence (CDD) process might not be enough. This is why enhanced due diligence (EDD) is essential: it consists of deeper investigations to check for potential money laundering and terrorist financing risk. EDD research can assist businesses comply with regulations and safeguard their reputation.
Imagine that someone downloads your app to open a brand new account. They’ve cleared the identity verification tests, and your analysis of their financial history hasn’t given any red flags. It’s good news however there’s a possibility of negative news. This is because the new customer may be part of a criminal organization that’s trying money laundering from illicit activities like drug trafficking, terrorism or corruption. This is the reason it’s important banks perform homepage additional due diligence, based on risk, on new and existing customers.
EDD is required in many cases when businesses are involved in high risk sectors, high risk countries, or any other field which requires a special attention. EDD searches can include searches for sanctions lists and criminal watchlists to ensure that the business is not doing business with people or companies who are prohibited by regulatory bodies.
Typically, an EDD investigation includes details such as: a comprehensive background profile of the client; the origin and destination of the funds; and other indicators of financial crime for instance, adverse media or the presence of known PEPs or financial criminals. It can also include detailed details regarding a customer’s beneficial ownership structure, including the identity of the people who manage or own the legal entity as well as the sources of wealth and money.
