What Is Enhanced Due Diligence?
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Due diligence is required when a customer or business is at greater risk of money laundering, terrorist financing, and other financial crimes. Known as enhanced due diligence (EDD) which goes beyond the normal KYC and AML checks by obtaining information outside the scope of normal KYC and AML.
This includes identifying people and entities behind customers, including the ultimate beneficial ownership (UBO) to discover the source of wealth or funds, as well as business activity. Also, it investigates unproven activities and transactions, and probes underlying relationships.
It’s an important component in the fight against terror and criminal funding. It is important to remember that EDD is a measure which should be applied on a case-by-case basis. For example for example, a UK bank account opening with a clean passport, solid address history and no CCJs could only require CDD, whereas another customer may require EDD due to the large number of cash deposits or more complex transactions.
The best method to determine if EDD is needed is to establish a comprehensive risk analysis and screening framework. This should cover your internal controls as well as external factors like negative media and sanctions, political instability terrorist finance and organized crime, as well as fraud and money laundering.
In the end, effective due diligence isn’t just about meeting the requirements of regulatory agencies or protecting your brand’s reputation. It’s about having a positive impact in the fight against the global threat of crime. You require an identity verification and EDD system that is quick efficient, accurate, and affordable to accomplish this.