Enhanced due diligence (EDD) is a risk based due diligence that allows businesses to handle high-risk transactions and customers, while also ensuring compliance with the regulations. When implemented correctly it safeguards companies from severe legal penalties and reputational damage while ensuring that their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) procedures are efficient in combating financial crime.
EDDs are generally required when a particular transaction or customer is classified as high risk due to the complexity of ownership structures or political risk. They may be required if the customer is in an reshaping the contours of due diligence with VDR innovations industry that is susceptible to financial crime or money laundering. A significant change in customer’s behavior, like an increase in the volume of transactions, or the creation of new types of transactions could also require an EDD. Additionally, any transaction that involves any region or country which is at risk of terrorist financing and money laundering requires an EDD.
EDD concentrates on identifying beneficial owners and uncovering hidden risks like the true beneficiaries in a transaction or a account. It also detects unusual or suspicious patterns in transactional behavior, and validates information with independent checks and interviews, website visits, and third-party verification. A examination of the local market’s reputation via media sources and the existing AML policies round out the risk evaluation.
EDD isn’t just a regulatory requirement; it’s a crucial element of safeguarding the integrity of the global financial system. Implementing effective EDD procedures is not just a matter to be complied with, it’s an investment in the safety and security of the global financial system.