enhanced due diligence (EDD) is a type of risk based due diligence system that enables companies to manage high-risk transactions and customers, while also ensuring compliance with the laws. If properly implemented it shields businesses from serious legal penalties and reputational damage while ensuring that their Anti-Money Laundering (AML) and Customer Due Diligence (CDD) procedures are efficient in combating financial crime.

Often, EDD is required when a customer or transaction is deemed high-risk due to complex ownership structures, political exposure, or involvement in industries prone to money laundering or financial crime. A significant change in the customer’s behavior, like an increase in the volume of transactions, or the creation of new types of transactions might also require an EDD. Additionally any transaction that involves a country or a area with a higher risk warpseq.com of money laundering or financing for terrorism is likely to require an EDD.

EDD concentrates on identifying beneficial owners and revealing hidden risks like the true beneficiaries in an account or transaction. It also detects unusual or suspicious patterns of transactional behavior and validates information with independent checks or interviews, visits to sites, and third-party verification. The risk assessment is carried out through a review of local market’s reputation through media sources, as well as the current AML policy.

EDD is not just a legal requirement, it’s an essential component of safeguarding the integrity of the global financial system. Implementing efficient EDD procedures isn’t just a matter of compliance–it’s an investment in the security and safety of the global financial system.