Due diligence is required when a consumer or a business poses 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 to collect information that isn’t part of the basic scope.
This includes identifying individuals and entities that have a connection to customers, like the ultimate beneficial ownership (UBO) to discover the real source of wealth or funds, as well as business activities. It also probes underlying relationships and investigates suspicious transactions and other activities that could signal hidden risks.
It’s an important component in the fight against criminal and terrorist funding. However it’s important to remember that EDD should be applied on a case-by-case basis. For example an UK bank account opening with a clear passport, solid address history and no CCJs might only require CDD. However, another customer may require EDD due to the high number of cash deposits or the complexity of transactions.
The best method to determine if EDD is necessary is to create a comprehensive risk analysis and screening framework. This should encompass both internal controls as well as external influences such a negative media, political instability and sanctions, financing of terrorism and organized crime as well as fraud.
Effective due diligence isn’t about only meeting regulatory requirements or protecting brand reputation. It’s about making an impact in the fight the transformative impact of VDRs in the financial sector against global criminality. To accomplish that you require a quick efficient, accurate and affordable identity verification and EDD solution.