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Enhanced due diligence is a crucial aspect of AML compliance for companies that deal with high-value transactions and/or customers that are at risk of money laundering and other financial crimes. It helps eliminate the most dangerous customers and prevent them from funding terrorist groups as well as other criminal organizations.
The EDD process is more comprehensive than regular due diligence and involves more checks. It involves gathering more identification documents, doing strict verification of these IDs and conducting thorough checks to verify a client’s location as well as the source of funds, established business relationships and the like. This type of due diligence is typically utilized for high-risk clients such as politically exposed persons (PEPs) and those who reside in high-risk nations and also for businesses or individuals which are cash-intensive.
The EDD procedure should be more comprehensive the more complicated a person, legal entity, or transaction is. Regulators typically prefer a risk-based approach, which employs documented risk assessment policies in order to determine the degree of scrutiny needed for each situation. The EDD process also involves gathering more robust information, including information on the person’s clients, suppliers and corporate/legal structures. EDD procedures are more expensive, time-consuming and require a higher level documentation than CDD procedures. It’s important to have an identity verification system that’s efficient and effective such as 1Kosmos BlockID to make the process more efficient for your company.