Enhanced due diligence (EDD) is a type of risk based due diligence that allows businesses to handle high-risk transactions and customers while remaining in compliance with the laws. If properly implemented it protects businesses from severe consequences for reputational damage and legal penalties while ensuring that warpseq.com article their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) processes are effective in combating financial criminality.
EDDs are typically required in cases where a transaction or a customer is deemed to be high risk due to complicated ownership structures or political risk. They can be required if the customer is in a field that is susceptible to financial crime or laundering. A significant change in the customer’s behavior such as an increase in volume of transactions or new types of transactions, may also require an EDD. Lastly, any transaction involving the 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 dangers, like the true beneficiaries of a transaction or account. It also identifies unusual and suspicious patterns of transactional behavior and validates the information with independent interviews and checks, site visits, and third-party confirmation. Additionally, a thorough review of the local market’s reputation through media sources and existing AML policies complete the risk evaluation.
EDD is more than an obligation for compliance; it’s a vital part safeguarding the integrity of the 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.