Enhanced Due Diligence AML – Use Cases And Benefits in Financial Sectors

Before doing a partnership with an individual or an institution in a business one has to be sure about the previous terms and activities. It is also essential to know that a business entity is not a risk for you, which may expose your personal data and lead you toward legal penalty. For that, this is not sufficient to search on the website about that business sector because that might be written fake over there. For that, Enhance Due Diligence AML is introduced which can easily access fake business entities. 

 

What is Enhanced Due Diligence (EDD)?

To know about Enhanced Due Diligence (EDD) first, it is important to know about Customer Due Diligence (CDD).  CDD  is a  process of checking the backgrounds of customers in financial institutions before making a business partnership with them. On the other hand, EDD is also a KYC procedure that is an enhanced feature of CDD which is used for the detection of risks of potential businesses at a great level. These high securities issues are covered by Enhanced Due Diligence in comparison to CDD. Customer Due Diligence is a less strict identification procedure than EDD. The EDD is stricter to extract the high risks to the authorities on time.       

 

A Way To Proceed EDD Compliance 

There is a step-by-step process to conduct Enhanced Due Diligence which is very helpful to observe fake identities in businesses. The process includes the following steps;

Observe Risky Customers 

Risk can be observed while onboarding the clients for that prevention EDD is practiced that it can save an organization from a fraud party in businesses. There is always a high fear and risk of scams in the financial sectors that are very compulsory to be detected before time. That detection and prevention from fake entities there is Enhanced Due Diligence AML which is introduced to observe such identities. 

 

Gather Information for Identification 

Collecting legal and personal information from business entities or PEPs is one of the main requirements to be filled. For this, a form is prepared which is designed to get whole data from the client to measure the level of their authenticity. For legal and various business entities some data is important to show, for example, they are bound to tell about;

  • Previous business records and company management
  • Documents of registration from the local registrar of the company
  • Business certificates and their partnership records
  • Bank information
  •  Information about the members of the company  

And, regarding PEPs the information to be collected is,

  • Details about the position and title of PEP
  • If PEP is one of the family members, his identity details, position, and is observed. 

Investigate the Sources Of Funds and UBO

Investigation of the wealth and financial status of customers is important to prevent the business from the risks of money laundering. For that following steps are taken,

  • Basic details regarding clients financial status are collected
  • Private and public companies work to detect the legitimacy of the assets of customers
  • The sources of income are observed and the total net worth is also estimated
  • Legal documents are observed like salary slips and property papers.

All legal entities are bound to have Ultimate Beneficial Ownership (UBO) information in their documents for convenient access to the legal and interested business entities.      

Observe Online Transactions of Clients

The background purpose and nature of transactions are observed for the prevention of money laundering and fake identities. In the case of cryptocurrency, it is essential to know about the history and nature of crypto transactions. 

Conduct a Physical Visit 

Furthermore, a visit to the provided address is essential, the documents that can not be provided digitally, are observed while visiting physically. This visit is also beneficial as it also confirms that the provided address is not fake and any breach is not done yet. 

Reviewing and Monitoring the Gathered Information 

After the previous EDD steps of security by KYC/AML, checkings are reviewed and the final draft is made. Thus, this draft is saved in the servers for future investigations. Such personal data of clients are monitored regularly by software like EDD banking to be saved from high risks.

Benefits of Due Diligence in Financial Sectors 

Enhanced Due Diligence AML is serving many benefits in the financial and corporate sectors such as, 

  • This AML/KYC compliance helps to serve the customers as well as the institutions in a better and advanced way and saves them from identity frauds and fake business entities
  • Due diligence helps to determine the financial criminals. A positive environment is mandatory for the growth of businesses and financial sectors, for that it is important to have an eye on facts that may cause risks to the authoritative entities
  • When customers are screened properly under financial services, it will safeguard the systems from dirty money from corrupted people and politicians. This will flourish the status of the company and build the trust of the clients as well.

Conclusion

In conclusion, it is assessed that all corporate sectors and financial institutions need to prevent themselves from money laundering and fake entities which can harm their potential. This will be prevented by using enhanced Due Diligence that can detect identity theft.   

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