Trillions of dollars of laundered funds circulate the globe each year, and 90% of that dubious money remains undetected. Financial institutions have to use increased due diligence to distinguish and reduce the risk of questionable activities that lead to reputational and financial damage and ensure AML compliance.
Enhanced due diligence (EDD) involves a much more thorough evaluation of individuals and companies that present elevated risks for AML/CFT. It is an file format of the client due diligence method, and is also triggered if your financial institution detects a high-risk element in that process. EDD may involve a much lower dive in to the customer’s background transaction patterns, and it is especially important for individuals considered to be see exposed folks (PEPs).
A number of financial institutions have been strike with huge fines to get failing effectively follow consumer due diligence standards. A robust EDD strategy enables FIs to manage elevated risk clients and transactions effectively while mitigating the potential for large financial losses, legal penalties and negative media attention.
Commonly, EDD is initiated when the primary CDD identifies a higher level of risk depending on country of residence, market sector, transaction patterns or associations with high-risk jurisdictions or individuals. During the EDD process, the FI definitely will collect even more comprehensive information concerning the customer to get a better knowledge of their organization activities, corporate structure, beneficial title and causes of funds.
The EDD method also includes frequent screenings of a customer against integrating VDRs in your business for a competitive edge watch lists, sanctions and VERVE lists to make certain they are not really on any kind of lists which would trigger added protocols. This really is an essential a part of effective and continuous monitoring, and an effective EDD remedy will include a robust internal and external risk evaluate engine which could scan multiple databases.