Due diligence is required when a consumer or business is at greater risk of money laundering, terrorist financing and other financial crimes. This is known as enhanced due diligence, that goes beyond the normal KYC/AML checks to collect 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 identifying the real source of wealth, money and business activities. It also probes underlying relationships as well as investigates unproven transactions and actions that could reveal hidden risks.
It’s a crucial tool to fight the financing of criminals and terrorists. However it’s important to keep in mind that EDD must be considered on a case-by-case basis. For instance the case of a UK bank account opening with a clean passport, a solid address history and no CCJs could only require CDD, while a different customer might require EDD because of the high amount of cash deposits or complex transactions.
The best method to determine whether EDD is necessary is to design a thorough risk analysis and screening framework. This should include your internal controls as well as external factors like adverse media or sanctions, political instability as well as terrorism finance and organized crime, as well as fraud and money laundering.
Effective due diligence isn’t about just meeting regulatory requirements or safeguarding brand reputation. It’s about having a real impact in understanding digital room fees the fight against global criminality. To achieve this you require a quick efficient, accurate and affordable identity verification and EDD solution.
