Trillions of dollars of laundered funds circulate the world each year, and 90% of that illicit money enhanced due diligence in banking sector analysis remains undetected. Financial institutions have to use increased due diligence to distinguish and mitigate the risk of questionable activities that lead to reputational and financial damage and ensure AML compliance.
Increased due diligence (EDD) involves a more thorough analysis of individuals and companies that present elevated risks for AML/CFT. It is an expansion of the client due diligence method, and it is triggered every time a financial institution detects a high-risk element during that process. EDD may involve a further dive in to the customer’s background transaction habits, and it is specifically important for the considered to be noteworthy exposed individuals (PEPs).
Numerous financial institutions have been struck with large fines to get failing to properly follow buyer due diligence expectations. A robust EDD strategy allows FIs to take care of increased risk customers and financial transactions effectively when mitigating the opportunity of large economical losses, legal penalties and negative advertising attention.
Commonly, EDD is initiated when the primary CDD recognizes a higher level of risk based on country of residence, sector sector, purchase patterns or associations with high-risk jurisdictions or persons. During the EDD process, the FI will collect more comprehensive information about the customer to acquire a better comprehension of their organization activities, corporate framework, beneficial possession and causes of funds.
The EDD procedure also includes regular screenings of the customer against watch lists, sanctions and VERVE lists to ensure they are not on any lists that might trigger added protocols. This can be an essential part of effective and continuous monitoring, and a good EDD formula will include a robust internal and external risk diagnosis engine that may scan multiple databases.
