Enhanced due diligence is an essential aspect of AML compliance for businesses that handle high-value transactions and/or customers that are susceptible to laundering money and other financial crime. It helps filter out the most risky customers and prevent them from supporting terrorist groups as well as other criminal organizations.
While the normal customer due diligence is designed to verify a customer’s identity however, the EDD process is much more extensive and requires wider range of checks. These include collecting more identification documents, doing strict verification of these IDs and conducting thorough investigations to verify the location of a customer or source of funds established business relationships and the like. This type of due diligence is usually applied to high-risk customers, such as politically exposed individuals (PEPs) or those who are located in high-risk areas as well as businesses or individuals which are cash-intensive.
The more complex the person, legal entity or transaction, the more thorough the EDD procedure should be. Regulators typically prefer the risk-based approach that employs documented risk assessment policies to determine the degree of scrutiny required for each situation. The EDD process involves gathering more reliable data that include information on the person’s suppliers and customers as well as corporate/legal structures and legal structures. EDD trends of virtual data room solutions procedures are typically more costly, time-consuming and require more documentation when compared to CDD procedures. That’s why it’s critical to have a strong and reliable technology for identity verification like the one that is built into 1Kosmos BlockID to make this process easier for your business.