The Importance of Enhanced Due Diligence

The standard approach to due diligence for customers may not be enough for clients with high risk. This is the reason why increased due diligence is needed: it involves deeper investigations to check potential financial laundering and terror financing dangers. EDD studies can help businesses comply with regulations and safeguard their reputation.

Imagine someone downloading your app to open an account with a new name. They’ve cleared the identity verification tests and the check of their financial history does not raise warnings. It’s good to hear, but there could be bad news. This is because the new client may be part of a criminal organization that is trying to hide money from illegal activities like terrorist acts, drug trafficking or corruption. It’s essential banks perform due diligence based on risks in relation to new and existing clients.

In a majority of cases, EDD is required for businesses that operate in high-risk sectors, high-risk countries, or any other field which requires a special examination. EDD searches could include a search on criminal watchlists in order to ensure that the business does not do business with people or companies banned by regulatory bodies.

A typical EDD investigation will include information such as a complete background profile of the person being investigated, the source and destination of the funds, and other indicators of financial crime, such as the presence of PEPs, financial criminals, or adverse media. It can also include detailed details about the beneficial ownership structure of a client, including identification of the individuals who control or own the legal entity and the sources of the funds and wealth.

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