Enhanced due diligence is a risk-based due diligence process that empowers companies to efficiently manage high-risk customers and transactions while remaining in compliance with the regulatory requirements. When implemented correctly it protects companies from severe legal and reputational harm while ensuring that their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) procedures are efficient in combating financial criminality.

Typically, EDD is required when a customer or transaction is classified as high-risk because of complex ownership structures, political exposure or involvement in industries that are susceptible to money laundering or financial criminality. Additionally any significant change in customer behavior for example, an increase in the volume of transactions or a change in the type of transactions, may require an EDD. In addition, any transaction that involves a country or region with a higher risk of terrorist financing and money laundering requires an EDD.

EDD concentrates on the identification of beneficial owners and uncovering hidden risks like the true beneficiaries in an account or transaction. It also identifies suspicious or unusual patterns in transactions, and confirms the information through independent checks, interviews, site visits, and third-party verification. The risk assessment is completed through a review of local market’s reputation using media sources, as well as an existing AML policy.

EDD is more than a requirement for compliance; it’s a vital part of ensuring the integrity of the global financial system. Implementing EDD procedures that are efficient is not just an issue of compliance. It’s an investment in the security and safety of the global financial system.

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