Enhanced due diligence is a risk-based due diligence process that empowers businesses to effectively handle high-risk customers and transactions while remaining in compliance with the requirements of regulatory authorities. When properly implemented, enhanced due diligence shields businesses from significant damage to reputation and legal sanctions while ensuring their Anti-Money Laundering and Customer Due Diligence procedures are effective in combating financial crimes.

EDDs are often required when a customer or transaction is deemed to be high risk due to complicated ownership structures https://warpseq.com/virtual-data-room-pricing-what-you-need-to-know/ or political risk. They may be required if the customer is in a field that is prone to financial crime or money laundering. A significant change in the customer’s behavior, such an increase in volume of transactions or new types of transactions could be a reason for an EDD. In addition, any transaction that involves a country or region with higher risks of money laundering or financing for terrorism will require an EDD.

EDD is focused on identifying beneficial owners and revealing undiscovered risks, like the real beneficiaries of a transaction or a account. It also identifies unusual or suspicious patterns in transactional behaviour, and validates information with independent checks, interviews, site visits, and third-party verification. The risk assessment is carried out by a review of the local market reputation via media sources, as well as an existing AML policy.

EDD is more than just an obligation for compliance and is a crucial element of protecting the integrity of the global financial system. Implementing efficient EDD procedures isn’t only a matter of compliance, it’s an investment in the safety and security of the global financial system.