Due diligence is required when a consumer or a business poses a 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 in order to gather information outside the basic scope.
This involves identifying the people and entities behind customers, such as the ultimate beneficial ownership (UBO) in revealing the real source of wealth or funds, as well as business activity. Also, it investigates unproven activities and transactions and examines the relationship behind them.
It’s a crucial tool in the fight against the financing of criminals and terrorists. It’s crucial to remember that EDD is a tool which should be applied on a case by case basis. For instance an UK bank account opening with a clean passport, a good address history and no CCJs may not require CDD, while another customer may require EDD due to the high number of cash deposits or the complexity of transactions.
The best way to determine whether EDD is needed is to develop a comprehensive risk analysis and screening framework. This should include internal controls and external factors like negative media, political instability and sanctions, terrorism financing and organized crime as well as fraud.
Effective due diligence isn’t just about complying with regulatory requirements or safeguarding your brand’s reputation. It’s about making a real impact on the fight against worldwide crime. To accomplish that, you need a fast, accurate and cost-effective identity verification and EDD solution.