enhanced due diligence (EDD) is a type of risk based due diligence that allows businesses to manage high-risk transactions and customers while remaining compliant with the regulations. When implemented correctly it protects businesses from severe legal penalties and reputational damage while ensuring that their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) processes are efficient in combating financial criminality.

Typically, EDD is required when the transaction or customer is classified as high-risk because of complex ownership structures, political exposure, or involvement in industries prone to money laundering or financial criminal activity. In addition, a significant shift in the behavior of a customer, such as an increase in the volume of transactions or unfamiliar types of transactions might require an EDD. In addition, any transaction that involves an area or country with a higher risk of money laundering or terrorism financing requires an EDD.

EDD focuses on the identification of beneficial owners, and uncovers hidden risk factors, including the true beneficiaries of a particular account or transaction. It also detects suspicious or unusual patterns in transactions, and confirms the information through independent checks or interviews, visits to sites, and third-party verification. The risk assessment is completed through a review of local market’s reputation through media sources, as well as an existing AML policy.

EDD isn’t only a requirement for regulatory compliance; it’s an essential element in protecting the integrity of our global financial system. Implementing efficient EDD procedures isn’t just about compliance; it’s an investment in the safety and security of the global financial system.

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