The Importance of Enhanced Due Diligence

The standard process of due diligence on the part of the customer may not be adequate for high-risk customers. This is why enhanced due diligence is necessary and involves deeper investigations to check potential terrorist financing and money laundering risks. EDD research can assist businesses comply with regulations and safeguard their reputation.

Imagine that someone downloads your app to open an account with a new name. They’ve cleared your identity verification checks and the check of their financial history doesn’t raise any suspicious flags. It’s a good thing that, but there could be negative news. This is because the new customer might be part of criminal activity that is trying to conceal funds from illegal activities like corruption, drug trafficking, or terrorist activities. This is why it’s crucial banks perform additional due diligence that is based on risk on both existing and new customers.

EDD can be required in a variety of cases for businesses that are involved in high-risk industries, high-risk countries, or any other industry that requires special scrutiny. EDD searches could include a search of criminal watchlists and sanctions lists to ensure that the company is not doing business with any of the companies or individuals who are banned by regulatory agencies.

Typically, an EDD investigation includes information like a complete background profile of the person who is being investigated as well as the location and origin of the funds; and other indicators of financial crime, such as negative media or the presence of known PEPs or financial criminals. It could also contain details about the customer’s beneficial ownership structure, including the identification of the individuals who control or own the legal entity as well as the sources of wealth and money.

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