Due diligence is required when a client or a business has a greater risk of money laundering, terrorist financing, and other financial crimes. Known as enhanced due diligence (EDD) it goes beyond the normal KYC and AML checks by gathering data outside of the normal scope.
This involves identifying the people and entities that are behind your customers, like ultimate beneficial ownership (UBO), and uncovering the source of wealth, money and business activities. It also investigates unexplained transactions and actions and investigates the underlying connections.
It’s a crucial aspect in the fight against the funding of terrorists and criminals. However it’s crucial to note that EDD should be applied on a case-by-case basis. For example, an account opening in the UK with an unclean passport, a solid address history and no CCJs may only require CDD. However, a different customer might require EDD due to an abundance of cash deposit or more complicated transactions.
The best method to determine if EDD is required is to establish a comprehensive risk analysis and screening framework. This should include both your internal controls as well as external factors such as adverse media as well as political instability, sanctions, terrorism finance and organized crime, as well as money laundering and fraud.
Ultimately, effective due diligence isn’t just about satisfying regulatory requirements or protecting your brand reputation; it’s about making a real safeguard your business’s critical assets with VDR encryption impact in the fight against the global threat of crime. You require an identity verification and EDD system that is swift, accurate, and cost-effective to achieve this.