Enhanced Due Diligence

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Due diligence is an important aspect of AML compliance, especially for businesses that handle high-value transactions or customers who are prone money laundering and financial criminal. It is used to identify the most risky clients and stop them from funding terrorist groups and other criminal organizations.

While the standard customer due diligence is designed to verify the identity of a client but the EDD procedure is more thorough and requires wider range of checks. This includes gathering more identification documents, carrying out rigorous verification of the IDs, and conducting thorough checks to verify the location of a customer and source of funds, known business relationships, and others. This kind of due diligence is typically used for high-risk customers like politically exposed people (PEPs) individuals who reside in high-risk nations, and individuals or businesses that are cash-intensive.

The EDD process should be more thorough the more complex a person, legal entity or transaction is. Regulators generally prefer the risk-based approach that employs documented risk assessment policies in order to determine the degree of scrutiny needed for each case. The EDD procedure involves gathering more detailed information like information about the individual’s suppliers and clients legal structures, corporate/legal entities, and legal structures. EDD procedures are more expensive, time-consuming and require a higher level documentation than CDD procedures. It is essential to have an identity verification system that’s efficient and effective such as 1Kosmos BlockID to make the process simpler for your business.

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