Enhanced Due Diligence

what is enhanced due diligence bsa

Due diligence is a vital part of AML compliance, especially for businesses that handle high-value transactions or clients who are prone money laundering and financial crime. It’s used to filter out the riskiest of clients and prevent them from funding terrorist groups and other criminal organizations.

The EDD process is more thorough than regular due diligence and involves a wider range checks. These include collecting more identification documents, performing rigorous verification of IDs and conducting thorough investigations to verify a client’s location, source of funds, known business relationships and other such things. This kind of due diligence is generally applied to high-risk customers, such as politically exposed persons (PEPs) individuals who are in high-risk countries, and individuals or businesses that rely on cash.

The EDD procedure will be more comprehensive the more complicated a particular person, legal entity or transaction is. Regulators usually favor a risk-based approach that uses documented risk assessment guidelines to determine the level of scrutiny needed for each particular case. The EDD process requires gathering more reliable data like information about the person’s suppliers and customers as well as corporate/legal structure and legal structures. EDD procedures are more expensive as well as time-consuming and require more detailed documentation than CDD procedures. It is crucial to have an identity verification system that is both effective and efficient, such as 1Kosmos BlockID to make the process easier for your business.