For customers with high risk The standard customer due diligence (CDD) process might not be sufficient. This is why enhanced due diligence is needed and involves deeper investigations to check potential terrorist financing and money laundering risks. EDD studies can help businesses comply with the law and protect their reputation.
Imagine someone downloading your app to create an account that is brand new. They’ve cleared the identity verification checks and your review of their financial history does not raise suspicious flags. It’s good news however there’s a possibility of negative news. The reason is that the new customer could be part of criminal enterprises that are trying to hide money from illegal activities such as drug trafficking, corruption or terrorist acts. It’s essential for banks to perform risk-based due diligence when it comes to new and existing clients.
In most cases, EDD is required for companies operating in high-risk industries or countries with high risk, or any other sector that requires special attention. EDD searches can include a lookup of sanctions lists and criminal watchlists to ensure that the company isn’t conducting business with any businesses or individuals who are banned by regulatory bodies.
A typical EDD investigation will include information such as a complete background profile of the client, the origin and destination of the funds and other indicators of financial crimes like the presence of financial criminals, PEPs, or adverse media. It could also contain information about a customer’s beneficial current trends in digital room solutions ownership structure, including the identification of those who control or own the legal entity and their sources of wealth and money.