Due diligence is a crucial aspect of AML compliance, particularly for businesses that deal with high-value transactions or customers who are prone money laundering and financial crime. It’s used to filter out the most risky customers and prevent them from funding terrorist groups and other criminal groups.
The EDD process is more thorough than regular due diligence, and involves a wider range checks. This involves obtaining more identification documents, as well as conducting thorough checks on the client’s location and source of funds. Due diligence is often applied to high-risk customers, such as politically exposed persons (PEPs) and those from high-risk countries, and companies or individuals who rely heavily on cash.
The more complex a person, legal entity or transaction, the more comprehensive the EDD procedure should be. Regulators typically favor a risk-based approach that leverages documented risk assessment procedures to determine the level of scrutiny needed for each situation. The EDD process involves gathering more detailed information including information about the person’s clients and suppliers as well as corporate/legal structure and legal structures. EDD procedures are more expensive and time-consuming. They also require higher level documentation than CDD procedures. It’s important to have an identity verification system that is both effective and efficient such as 1Kosmos’ BlockID, to make the process more https://warpseq.com/5-trends-of-virtual-data-room-solutions/ efficient for your business.