Due diligence is required when a person or a business poses a greater risk of money laundering, terrorist financing and other financial crimes. This is referred to as enhanced due diligence, that goes beyond the normal KYC/AML checks and gathers information that isn’t part of the basic scope.
This involves identifying the people and entities that are behind customers, such as the ultimate beneficial ownership (UBO) and identifying the real source of wealth or funds, as well as business activities. It also investigates the underlying relationships and investigates unexplained transactions and activities that could reveal hidden risks.
It’s an important tool in the fight against terrorist and criminal funding. It’s important to remember that EDD is a security measure which should be applied on a case by case basis. For instance, a UK bank account opening with a clean passport, a solid address history and no CCJs may only require CDD. However, another customer may require EDD due to the large quantity of cash deposits or the complexity of transactions.
The best way to evaluate the necessity for EDD is to build an entire risk assessment and https://warpseq.com/ screening framework. This should encompass both internal controls as well as external factors such a negative media, political instability, sanctions, financing of terrorism and organized crime, as well as fraud.
Ultimately, effective due diligence doesn’t just mean meeting the requirements of regulatory agencies or protecting your brand reputation; it’s about having a positive impact on the fight against criminality in the world. You require an identity verification and EDD system that is fast precise, reliable, and cost-effective to accomplish this.
