Enhance Due Diligence: Combat Money Laundering & Terrorist Financing

Enhance due diligence is the process of identifying the identity of the partner entities. To prevent money laundering and terrorist financing, thorough verification of customers and businesses is necessary to ensure they are not involved in illicit activities. EDD is a risk-based approach that helps companies such as financial institutes, trusts, organizations, and banks to combat financial crimes. The EDD is crucial in verifying high-risk entities and addressing compliance challenges. 

This article is a guide to corporate due diligence and streamlining the onboarding business through comply rigid obligations

What is EDD 

In the current era of technology, companies have to overcome various challenges, including verifying partner businesses through rigid measures. The regulatory bodies are also pushing their limits to combat multiple regulations. Especially in financial institutes, law enforcement agencies are trying to prevent money laundering, where millions of illicit cash flows go undetected in the global ecosystem. 

Companies aiming to comply with the AML/CFT regulations must verify the identity of the partner business. In the meantime, the EDD is one of the best procedures for business verification. It assists companies in differentiating between low-risk customers and high-risk entities. In short, the EDD is an extensive way to verify partners’ identities and offer risk-based approaches. 

Depending on the risk levels of the customer, companies divide the due diligence into two steps: enhance due diligence and simple due diligence. 

Simple Due Diligence 

For this process, the company only examines the company that has a low or medium level of risk. The company don’t go for in-depth checks. They only verify the identity and check the originality of documents. In this way, they only verify their identity through the groundwork of reality. It’s not complex due diligence. This enhances the technique speed through the streamlined onboarding process. Compared to the EDD, the SDD is quicker and can be done with fewer clicks. 

Enhanced Due Diligence 

The advanced risk-based EDD approach involves gathering in-depth information about the company and its owners. Enhance due diligence is the risk assessment process for high-risk customers and business relationships to understand entity identity as well as to mitigate the potential risk associated with the business. The enhanced due diligence is measured to check and verify the high-risk or high-net-worth customers’ identity and transactions. Due to the high risks associated with these customers and transactions, they are subjected to strict regulations and monitoring to ensure compliance and integrity within the financial sector.

Enhanced Due Diligence Checklist 

Companies must comply with several checklists for enhanced due diligence before onboarding partner business. These measures differentiate both due diligence process:

• EDD focuses on measuring the high-risk entities associated with specific customers to determine their identity and mitigate fraud. This information assists the onboarding company in disclosing what their partner business is doing or monitoring their current activities. Verify these documents to clarify the company’s legitimate source and ensure that the partner business is free from illicit activities.
• Companies gather in-depth information about the company to comply with the EDD, including financial statements, transaction histories, registration numbers, licenses, permits, and other relevant data. They assess the owner’s data of the company that owns the business and the actual funding source of the company. They have to ensure all the key stakeholders are legal and not involved in illicit activities. 
• For enhanced due diligence, companies must follow digital trends and utilize advanced technology, such as machine learning and robust AI innovations, to reduce false positives and reap 100% accurate results.
• Companies should also establish a thorough policy to safeguard data against unauthorized access. Regular audits must be carried out to guarantee compliance. Ultimately, employees should receive training on the significance of data privacy and security.
• Complying with rigid regulatory authorities through corporate screening against sanctions watchlists such as PEPs, AML, CFT, SIEs, and the FBI. Information about individuals involved in money laundering is stored in these databases. During the EDD, companies must also understand various other obligations according to the company policies, including beneficial ownership transparency and BOI reporting. 

Final Note 

Overall, enhanced due diligence is essential for all companies to combat money laundering and terrorist financing. However, compliance with the traditional technique takes time and is costly for the company. Moreover, it also poses various threats during the onboarding business, including false positives. To overcome these challenges, the company must rely on automotive techniques to boost security and streamline processes. These techniques include machine learning, predictive analytics, and automation. They can help detect potential threats faster, reduce costs, and ensure secure onboarding.