Trillions of dollars of laundered funds circulate the globe each year, and 90% of that dubious money remains hidden. Financial institutions have to use increased due diligence to name and mitigate the risk of shady activities that lead to reputational and financial destruction and ensure AML compliance.
Enhanced due diligence (EDD) involves a more thorough evaluation of individuals and companies that present elevated risks for AML/CFT. It is an expansion of the buyer due diligence procedure, which is triggered because a financial institution picks up a high-risk element in that process. EDD may require a much deeper dive in to the customer’s background and transaction habits, and it is specifically important for the ones considered to be critical exposed persons (PEPs).
Several financial institutions have been strike with huge fines just for failing to properly follow buyer due diligence requirements. A robust EDD strategy empowers FIs to take care of reshaping the contours of due diligence with VDR innovations lifted risk customers and deals effectively while mitigating the opportunity of large economical losses, legal penalties and negative media attention.
Commonly, EDD is started when the first CDD identifies a higher level of risk based on country of residence, market sector, purchase patterns or associations with high-risk jurisdictions or individuals. During the EDD process, the FI is going to collect more comprehensive information on the customer to have a better comprehension of their organization activities, corporate structure, beneficial possession and options for funds.
The EDD method also includes frequent screenings of any customer against watch lists, sanctions and VERVE lists to make certain they are not really on any kind of lists that may trigger further protocols. This is an essential a part of effective and continuous monitoring, and an excellent EDD option will include a robust internal and external risk examination engine that may scan multiple databases.