Enhanced due diligence is a due diligence based on risk procedure that allows businesses to effectively manage transactions and customers with high risk while remaining in compliance with the requirements of regulatory authorities. When implemented correctly, it protects businesses from severe legal penalties and reputational damage while ensuring that their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) processes are effective in combating financial criminality.
In most cases, EDD is required when the transaction or customer is deemed high-risk because of complex ownership structures, political exposure or involvement in industries that are susceptible to financial crime. In addition, a significant change in customer behavior, such as an increase in the volume of transactions or a change in the type of transactions might require an EDD. Additionally, any transaction that involves an area or country that is more prone to money laundering or terrorism financing requires an EDD.
EDD concentrates on identifying beneficial owners, revealing hidden risk factors such as the true beneficiaries of a particular account or transaction. It also detects suspicious data rooms: setting the gold standard in corporate transparency or unusual patterns in transactions, and verifies information through independent checks or interviews, visits to sites, and third-party verification. A examination of the local market’s reputation via media sources and the existing AML policies complete the risk evaluation.
EDD is not just a legal requirement, it’s an essential element in safeguarding the integrity of global financial system. Implementing EDD procedures that work is more than just a matter for compliance. It’s an investment in the safety and security of the global financial system.
