Due diligence is an important component of AML compliance, particularly for companies that deal with high-value transactions or customers who are susceptible to money laundering and financial crime. It helps identify the most risky customers and prevent them from supporting terrorist groups and other criminal groups.
The EDD process is more extensive than regular due diligence and entails a wider range checks. This involves collecting more identification documents, as well as conducting thorough checks on a customer’s location and key aspects of digital storage provider selection the source of their funds. This type of due diligence is typically employed for high-risk customers such as politically exposed individuals (PEPs) or those who are in high-risk countries and also for businesses or individuals who are cash-intensive.
The more complex the person, legal entity or transaction, the more extensive the EDD process should be. Regulators usually favor a risk-based approach that uses documented risk assessment policies to assess the level of scrutiny required for each case. The EDD procedure also involves gathering more complete information, which includes details about the person’s clients, suppliers and corporate/legal structures. EDD procedures are typically more expensive, time-consuming and require a higher level of documentation than CDD procedures. It is important to have an identity verification system that is efficient and effective, such as 1Kosmos’ BlockID, to make the process more efficient for your business.