Enhanced due diligence is a risk-based due diligence procedure that allows businesses to effectively handle high-risk customers and transactions while remaining in compliance with the regulatory requirements. If properly implemented, enhanced due diligence protects companies from severe legal penalties and reputational damages while ensuring their Anti-Money Laundering and Customer Due Diligence procedures are effective in combating financial crimes.

EDDs are often required when a particular transaction or customer is classified as high-risk due to complicated ownership structures or political risk. They could be required if the customer is in a field that is prone to financial crime or laundering. In addition there is a significant change in customer behavior like an increase in the volume of transactions or a change in the type of transactions could warrant an EDD. Additionally any transaction that involves a country or region with a higher risk of money laundering or financing for terrorism is likely to require an EDD.

EDD focuses on the identification of beneficial owners, and uncovers hidden risk factors, including the true beneficiaries of a transaction or account. It also identifies suspicious and unusual patterns of transactional activity and verifies the information through independent checks and interviews, site visits and third-party verification. The risk assessment is completed by a thorough review of the local market’s reputation, based on media sources, as well as an existing AML policy.

EDD is more than a requirement to ensure compliance it’s a vital element safeguarding the integrity of the global financial system. Implementing EDD procedures that are effective is more than just an issue of compliance. It’s an investment into the safety and security of the global financial system.

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