The standard process of due diligence on the part of the customer may not be sufficient for high-risk customers. This is why enhanced due diligence (EDD) is crucial: it consists of deeper investigations to look for money laundering and financing for terrorists. EDD studies can help businesses comply with regulations and protect their reputation.
Imagine someone downloading your app to open an account with a new name. They’ve passed the identity verification checks and your analysis of their financial history has not given any alarms. This is a good thing, but it could be negative for your company. The reason is that the new customer could be part of an illegal enterprise trying to launder money through illicit activities such as drug trafficking, corruption or terrorist activity. This is why it’s vital for banks to conduct additional due diligence based on risk on both existing and new customers.
EDD is required in many instances when businesses are involved in high risk sectors, high risk countries, or any other https://warpseq.com/best-data-rooms-online-secure-and-reliable/ field that require special scrutiny. EDD searches could include a search of sanctions lists and criminal watchlists to make sure that the business is not conducting business with any businesses or individuals that are prohibited by regulatory bodies.
Typically an EDD investigation will include information like a full background profile of the customer; the location and source of the funds; and also indicators of financial crime, for instance, adverse media or the presence of a known PEPs or financial criminals. It could also contain details about the customer’s beneficial ownership structure, such as the identification of the persons who control or own the legal entity as well as the source of wealth and funds.