Due diligence is an essential part of AML compliance, particularly for businesses that handle high-value transactions or clients who are prone money laundering and financial criminal. It’s used to eliminate the most risky customers and prevent them from donating to terrorist organizations and other criminal organizations.
The EDD procedure is more thorough than regular due diligence and includes more checks. This involves collecting more identification documents as well as performing thorough checks of a customer’s location and the source of their funds. Due diligence is generally used for high-risk clients such as politically-exposed persons (PEPs) or those who reside in high-risk countries, as well as businesses or individuals that rely heavily on cash.
The more complex the individual, legal entity or transaction, the more extensive the EDD process should be. Regulators typically favor an approach based on risk that utilizes documented risk assessment guidelines to determine the degree of scrutiny needed for each case. The EDD process requires gathering more reliable data like information about the person’s suppliers and clients as well as corporate/legal structures and legal structures. EDD procedures are typically more expensive, time-consuming and demanding of more documentation than CDD procedures. It is important to have an identity verification system that’s both effective and efficient such as 1Kosmos BlockID to make the process simpler for your company.
