Due diligence is required when a client or business is at greater risk of money laundering, terrorist financing, and other financial crimes. This is known as enhanced due diligence that goes beyond the normal KYC/AML checks to collect information outside the basic scope.
This involves identifying the people and entities that are behind your customers, such as ultimate beneficial ownership (UBO), and uncovering the source of wealth, money and business activities. It also examines the relationships behind them and examines unresolved transactions and other activities that could reveal hidden risks.
It’s an important tool to fight terrorist and criminal funding. However, it’s important to note that EDD should be analyzed on an individual basis. For example, an account opening in the UK with a clean passport, a solid address history and no CCJs may only require CDD. However, a different customer could require EDD because of an abundance of cash deposit or more complicated transactions.
The best method to determine if EDD is needed is to establish a comprehensive risk analysis and screening framework. This should include internal controls as well as external influences like negative media, political instability and sanctions, terrorism financing as well as organized crime and fraud.
Ultimately, effective due diligence isn’t just about complying with regulatory requirements or safeguarding your brand’s reputation. It’s about having Board Software a significant impact on the fight against worldwide crime. To accomplish that, you need a fast accurate, reliable and cost-effective identity verification and EDD solution.