Due diligence is a crucial element of AML compliance, particularly for companies that deal with principle moments of data room provider comparison high-value transactions or clients who are at risk of money laundering or financial crime. It is used to identify the most risky customers and prevent them from donating to terrorist groups and other criminal organisations.
While the normal customer due diligence is designed to determine the identity of a person, the EDD process is more comprehensive and requires a wider range of checks. This involves obtaining more identification documents and conducting thorough checks on the client’s location and the source of funds. This type of due diligence is generally employed for high-risk customers like politically exposed people (PEPs) or those who are located in high-risk areas and businesses or individuals that rely on cash.
The more complicated the person, legal entity or transaction, the more thorough the EDD process should be. Regulators generally prefer a risk-based method that uses documented risk assessment policies to determine the amount of scrutiny needed for each situation. The EDD process requires gathering more detailed information that include information on the person’s suppliers and clients as well as corporate/legal structures and legal structures. EDD processes are often more costly, time-consuming and require more documentation compared to CDD procedures. This is why it’s crucial to use a reliable and efficient identity verification system like the one that is built into 1Kosmos BlockID to make this process easier for your company.