Enhanced due diligence is an essential element of AML compliance for companies that deal with high-value transactions or customers who are susceptible to laundering money and other financial crimes. It’s used to filter out those who are most at risk and deter them from funding terrorist groups and other criminal organizations.
The EDD procedure is more thorough than regular due diligence, and involves homepage a wider range checks. These include collecting more identification documents, performing rigorous verification of the IDs, and conducting thorough tests to verify the location of a customer, source of funds, established business relationships and the like. Due diligence is often applied to high-risk clients, like politically-exposed people (PEPs) and those from high-risk countries, and companies or individuals who depend heavily on cash.
The EDD process should be more thorough the more complicated a person, legal entity, or transaction is. Regulators typically prefer a risk-based approach, which employs documented risk assessment policies in order to determine the degree of scrutiny needed for each situation. The EDD procedure also requires more comprehensive information, including details about the person’s clients, suppliers and corporate/legal structures. EDD procedures are more expensive and time-consuming. They also require higher level documentation than CDD procedures. It is therefore crucial to have a solid and reliable technology for identity verification like the one built into 1Kosmos BlockID to make this process more efficient for your company.
