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Due diligence is required when a client or a business poses a greater risk of money laundering, terrorist financing and other financial crimes. Known as enhanced due diligence (EDD), this extends beyond the basic KYC and AML checks by gathering information beyond the scope of the standard checks.
This includes identifying the individuals and entities behind your customers, such as ultimate beneficial ownership (UBO) and identifying the true source of wealth, money and business activity. It also investigates the underlying relationships and investigates suspicious transactions and activities that may indicate hidden risks.
It’s a key aspect in the fight against criminal and terrorist funding. It is important to remember that EDD is a measure which should be applied on a case by case basis. For instance, a bank account opening in the UK with clear passport, a solid address history, and no CCJs might only require CDD. However, another customer may require EDD due to an abundance of cash deposit or more complicated transactions.
The best way to evaluate the necessity for EDD is to create an extensive risk assessment and screening framework. This should cover your internal controls as well as external factors such as adverse media, political instability, sanctions as well as terrorism finance organized crime, fraud and money laundering.
Effective due diligence doesn’t just mean complying with regulatory requirements or safeguarding your brand’s reputation. It’s about having a positive impact in the fight against worldwide crime. To achieve this you require a speedy, accurate and cost-effective identity verification and EDD solution.
