Due diligence is required when a consumer or a business has a 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 collecting information outside of the basic scope.

This involves identifying the people and entities behind customers, including the ultimate beneficial ownership (UBO) and identifying the source of wealth or funds, as well as business activity. It also investigates illogical transactions and activities, and probes underlying relationships.

It’s a crucial tool to fight the financing of criminals and terrorists. It’s crucial to remember that EDD is a security measure which should be applied on a case by case basis. For instance, a bank account opening in the UK with a clean passport, a solid address history and no CCJs could only require CDD. However, another customer might require EDD due to an excessive amount of cash deposit or complex transactions.

The best way to determine if EDD is required is to develop a comprehensive risk analysis and screening framework. It should encompass both your internal controls and external factors like negative media or political instability, sanctions as well as terrorism finance and organized crime, as well as fraud and money laundering.

Effective due diligence isn’t simply meeting regulatory requirements, or safeguarding brand reputation. It’s about having an impact on the fight against global criminality. To achieve this you need a swift reliable, accurate and cost-effective identity verification and EDD solution.

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