Working of Enhanced Due Diligence To Fight Against Money Laundering

Last Updated: June 14, 2022 By

High-risk clients can be seen everywhere, in all states globally which is not fine for the productivity and reputation of the institution, because of that reason all primary and secondary businesses should be aware and awake before making any business partnerships and relations. This is mandatory to know with whom you are developing business relationships, it will help you further to secure your business from those parties who are thinking to damage your status and lessen down your productivity. Those criminals will try their best and put their smart efforts to fulfill their illicit wishes, to fight against all such consequences enhanced due diligence (EDD) is introduced. Which will first perform customer due diligence (CDD) to verify the clients, and make it easy for businesses to decide whether that party is capable of working with or not.

Why Enhanced Due Diligence is more Efficient Than Customer Due Diligence?

For all businesses, it is compulsory to know your customer first before associating with any business relation for that CDD is performed, in which with the support of KYC regulations, a client is verified first in-depth and analysis is highlighted, that tells us that this person is not here for illicit objectives and is not a risk for the business, but such steps can not identify that the person is enlisted in any money laundering lists or an authentic entity, for that enhance due diligence (EDD) is performed. This reflects that to know that if a person is in the list of politically exposed persons (PEPs). Like this, identity is verified with both CDD and EDD compliances, but the EDD is more proficient and beneficial for the verification and can prevent the businesses from sanctions and shell companies.

Requirement of EDD Banking

The requirement of EDD banking will remain till the end of the world, which will serve its services to all businesses and financial institutions and help them to maintain their productivity and reputations high in the market. Enhanced due diligence (EDD) banking is efficient compliance that detects those clients who are high-risk for the system and will cause terror financing and money laundering. Moreover, Such businesses that are interested in making large transactions, first have to be subjected to the process of enhanced due diligence (EDD) for the surety of the accurate results, that this transaction is not linked with any money laundering case nor performed by a person who is enlisted in politically exposed person (PEPs). Furthermore, the important and mandatory part of this enhanced due diligence (EDD) banking is that it verifies the sources of the funds (SOFs) of the authoritative individuals as well with the help of AML compliance program, that provides details regarding the earning source of the businesses, which clarifies that this earned money is from legal means and is not black money that is gathered from money laundering.

How to Perform Enhanced Due Diligence Financial Services?

EDD financial services is an ongoing mechanism that monitors the attitude and workings of merchants that takes place under the experts who analyzes everything in depth, it has a complete procedure to be followed, such as;

Analyzing the Risks

It is clear that when an individual thinks about having business relations with the opposite party he should be prepared to face multiple issues and should have at the back of his mind that he might face some kind of queries. He should have questions regarding the risk of money laundering, terror financing, frauds, and breaching, etc. Hence, to eliminate those risks in all businesses, the authoritative entities should be alert to take the action, so that, the first that is performed in EDD is the detection of high-risk clients that are extremely harmful to the businesses. For that, AML screening is practiced that will help to identify the clients in the lists of politically exposed persons (PEPs) to check them if they are involved in money laundering, by checking their background information and the sources of their funds. Then they are classified for further examination in further steps.

Generating EDD Checklists

Then, an enhanced due diligence (EDD) list is created to notice high-risk end-users and their transactions, that are covering all important credentials which are mentioned to know the real concerns of the customers. Moreover, the analysis of all previous transactions is performed just because of the reason that one can be identified by the ins and outs of their payments and can be judged by easily that all such transactions are in black form or the clean money. Hence, all of these mechanisms can be performed by using third-party analysts, sources, and tools, which will work efficiently in the detection of money launderers.

Attesting Important Credentials

In the third step, the ultimate beneficial ownership (UBO) and the sources of the funds (SOF) are examined in detail. That guarantees that this person is not involved in any illegal money transactions and has an authentic source of income as well as he is not using the identity of another person for transactions of the bulk amount of money and using it for his own illicit objectives. All these consequences would be visible in a system if any single shell company or an imposter entity be found in the business space. But, now with the advancement of the technologies, it is very easy now to obstruct out all fake business partnerships and is easily handled now with the help of this enhanced due diligence compliance.

Investigation of Transactions

This step is carried out by the know your customer (KYC) compliance, which provides the previous transaction history of a customer and also opens up the number and amount of transactions, and analyzes the type of transactions. It helps in the process of EDD, which provides a hypothesis to decide whether that person is risk-free, capable of trusting, having authentic sources of earnings, and is not listed in PEPs even for a single time, before making a business relationship with.

Unfavorable Media Screening

Media screening is a process in which the news about the customer is gathered from the public and third-party data sources. In the case of positive remarks, one can make a healthy business relationship but in the case of negative remarks, one has to avoid and prevent themselves from making such partnerships. Furthermore, if you talk about rumors, they extremely affect drastically, especially in the case of businesses, where monetary transactions are happening one after another, the rumors alert the businesses efficiently that they need to recheck the credentials of the opposite business party or not to make a relation at all. Sometimes the thing that happens with authentic companies is that the fake rumors affect their productivity even though they are not involved or attached to a phishing association. To combat all such circumstances, the only SaaS provider is EDD which will smartly analyze the companies and their businesses and provide all original data with accuracy regarding them.

Summing Up All

To conclude the whole conversation, it is clear that EDD banking is a need of an hour for the prevention of high-risk criminals, who are performing money laundering and financial terrorism, and putting their whole effort in dragging down the reputation of a business and affecting its productivity drastically.

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