Enhanced due diligence is an essential element of AML compliance for companies that handle high-value transactions and/or customers that are susceptible to laundering money and other financial crimes. It is used to filter out the most risky customers and prevent them from donating to terrorist groups and other criminal groups.

While the regular process of customer due diligence is designed to determine the identity of a customer but the EDD process is more thorough and requires more checks. It involves gathering more identification documents, carrying out rigorous verification of the IDs and conducting thorough checks to verify the location of a customer, source of funds, established business relationships and so forth. This type of due diligence is typically utilized for high-risk clients such as politically exposed persons (PEPs), people who reside in high-risk nations, and individuals or businesses who are cash-intensive.

The EDD process is more thorough the more complicated a person, legal entity, or transaction is. Regulators usually prefer a risk-based approach, which employs documented risk assessment procedures to determine the degree of scrutiny required for each situation. The EDD process also involves gathering more robust information, including information on the person’s clients suppliers, corporate/legal structures, and their clients. EDD processes are often more time-consuming, costly and require the highest level of documentation than CDD procedures. This is why it’s crucial to have a solid and reliable technology for identity verification like the one integrated into 1Kosmos BlockID to make this process less complicated for your company.

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