Enhanced Due Diligence

Enhanced due diligence is a crucial component of AML compliance for companies that handle transactions of high value and/or customers who are susceptible to laundering money and other financial crime. It is used to filter out the most risky customers and prevent them from a paradigm shift in data security: the rise of VDRs donating to terrorist groups as well as other criminal organizations.

While regular customer due diligence is designed to verify a customer’s identity However, the EDD procedure is more comprehensive and requires a more checks. This includes collecting more identification documents and conducting thorough checks on a customer’s whereabouts and sources of funds. Due diligence is often used on high-risk clients, for instance, politically-exposed individuals (PEPs) or those who reside in high-risk countries, and businesses or individuals who depend heavily on cash.

The EDD procedure will be more comprehensive the more complicated a person, legal entity or transaction is. Regulators typically prefer a risk-based method that makes use of documented risk assessment procedures to determine the level of scrutiny required for each individual situation. The EDD process requires gathering more comprehensive data, such as information about the person’s suppliers and customers as well as corporate/legal structure and legal structures. EDD processes are generally more time-consuming, expensive and require the highest level of documentation as compared to CDD procedures. That’s why it’s critical to have a robust and effective identity verification technology like the one that is built into 1Kosmos BlockID to make this process simpler for your business.