Due diligence is an essential aspect of AML compliance, especially for businesses that handle high-value transactions or customers who are prone money laundering and financial criminal. It is used to filter out the most risky clients and stop them from supporting terrorist groups and other criminal groups.
While the regular process of customer due diligence is designed to confirm the identity of a https://warpseq.com/what-do-virtual-data-rooms-offer/ person, the EDD procedure is more comprehensive and requires a more checks. These include collecting more identification documents, conducting strict verification of these IDs and conducting thorough investigations to verify a client’s location or source of funds known business relationships and so forth. This type of due diligence is usually applied to high-risk customers, like politically exposed people (PEPs) or those who reside in high-risk nations as well as businesses or individuals that are cash-intensive.
The EDD procedure will be more comprehensive the more complex a person, legal entity or transaction is. Regulators typically favor a risk-based approach that uses documented risk assessment policies to assess the level of scrutiny that is required for each particular case. The EDD procedure also involves gathering more robust information, including details about the person’s clients suppliers, corporate/legal structure and other clients. EDD procedures are more costly and time-consuming, and require more detailed documentation than CDD procedures. It’s important to have an identity verification system that is efficient and effective such as 1Kosmos BlockID to make the process more efficient for your business.
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