Enhanced Due Diligence
Due diligence is an important element of AML compliance, particularly for businesses dealing with high-value transactions or customers who are susceptible to money laundering and financial crime. It is used to identify the most prone customers and prevent them from funding terrorist organizations as well as other criminal groups.
While the regular process of customer due diligence is designed to determine the identity of a person but the EDD process is more thorough and requires wider range of checks. This includes collecting more identification documents and conducting thorough checks on the client’s location and the source of funds. This kind of due diligence is typically used for high-risk customers like politically exposed people (PEPs) and those who reside in countries with high risk and businesses or individuals who are cash-intensive.
The more complex a person, legal entity or transaction, the more extensive the EDD procedure should be. Regulators generally favor a risk-based method that makes use of documented risk assessment procedures to determine the level of scrutiny that is required for each case. The EDD procedure involves gathering more detailed information like information about the person’s suppliers and clients as well as corporate/legal structure and legal structures. EDD procedures are more costly and time-consuming, and require higher level of documentation than CDD procedures. It’s important to have an identity verification system that is both effective and efficient, such as 1Kosmos BlockID to make the process more efficient for your business.
