Due diligence is a vital element of AML compliance, particularly for businesses that deal with large-value transactions or have customers who are prone money laundering and financial criminal. It helps filter out the most risky clients and stop them from donating to terrorist groups and other criminal groups.
The EDD process is more thorough than regular due diligence and entails the use of a wider array of checks. It involves gathering more identification documents, performing rigorous verification of the IDs and conducting thorough investigations to verify the location of a customer or source of funds established business relationships and so forth. Due diligence is generally used on high-risk clients, for instance, politically-exposed individuals (PEPs) and those from high-risk countries, and companies or individuals who rely heavily on cash.
The more complex a person, legal entity or transaction, the more comprehensive the EDD process should be. Regulators generally prefer an approach based on risk that utilizes documented risk assessment procedures to determine the level of scrutiny needed for each case. The EDD procedure also involves gathering more complete information, which includes details about the person’s clients suppliers, corporate/legal structures, and their clients. EDD procedures are more costly and time-consuming. They also require higher level documentation than CDD procedures. This is why it’s crucial to have a strong and reliable identity verification technology such as the one built into 1Kosmos BlockID to make this process more efficient for your business.
