Enhanced due diligence is an essential aspect of AML compliance for businesses that handle transactions of high value and/or customers who are at risk of money laundering and other financial crimes. It helps eliminate the most dangerous customers and prevent them from donating to terrorist groups and other criminal groups.
While regular customer due diligence is designed to verify the identity of a client however, the EDD process is much more thorough and requires wider range of checks. This involves collecting more identification documents, as well as conducting thorough checks on the client’s location and source of funds. This kind of due diligence is typically applied to high-risk customers, such as politically exposed individuals (PEPs) or those who reside in high-risk nations and businesses or individuals that are cash-intensive.
The more complex a person, legal entity or transaction, the more extensive the EDD procedure should be. Regulators generally prefer an approach based on risk that utilizes documented risk assessment procedures to determine the degree of scrutiny needed for each case. The EDD procedure involves gathering more comprehensive data that include information on the person’s clients and suppliers legal structures, corporate/legal entities, and legal structures. EDD procedures are typically more costly, time-consuming and require the highest level of documentation as compared to CDD procedures. This is why it’s crucial to have a robust and efficient identity verification system like the one built into 1Kosmos BlockID to make this process easier for your business.
VDRs: the touchstone of excellence in business data management
