Due diligence is required when a consumer or a business has a greater risk of money laundering, terrorist financing, and other financial crimes. This is known as enhanced due diligence, which goes beyond standard KYC/AML checks and gathers information that isn’t part of the basic scope.
This includes identifying the individuals and entities that are behind your customers, including ultimate beneficial ownership (UBO), and uncovering the true source of wealth, funds and business activities. Also, it investigates unproven activities and transactions and examines the relationship behind them.
It’s a key aspect in the fight against the funding of terrorists and criminals. However, it’s important to note that EDD must be considered on a case-by-case basis. For instance, an account opening in the UK with clear passport, a solid address history and no CCJs could only require CDD. However, a different client could require EDD because of the high volume of cash deposit or more complicated transactions.
The best way to assess the necessity for EDD is to develop an entire risk assessment and screening framework. This should include both internal controls as well as external influences such a negative media, political instability and sanctions, terrorism optimizing deal timelines with real-time VDR collaborations financing, organized crime and fraud.
Ultimately, effective due diligence doesn’t just mean complying with regulatory requirements or safeguarding your brand’s reputation. It’s about making a real impact in the fight against criminality in the world. You need an identity verification and EDD system that is swift, accurate, and cost-effective to achieve this.
