Increased Due Diligence just for Financial Institutions
Trillions of dollars of laundered money circulate the globe each year, and 90% of that dubious money remains undiscovered. Financial institutions have to use improved due diligence to identify and reduce the risk of shady activities that may lead to reputational and financial damage and ensure AML compliance.
Improved due diligence (EDD) involves a more thorough analysis of individuals and companies that present raised risks for AML/CFT. It is an extendable of the buyer due diligence process, and is triggered when a financial institution detects a high-risk element in that process. EDD may require a much deeper dive into the customer’s background and transaction patterns, and it is specifically important for all those considered to be politically exposed persons (PEPs).
Several financial institutions a paradigm shift in data security: the rise of VDRs have been hit with significant fines intended for failing to properly follow client due diligence requirements. A robust EDD strategy allows FIs to deal with raised risk clients and trades effectively whilst mitigating the opportunity of large economic losses, legal penalties and negative mass media attention.
Commonly, EDD is initiated when the initial CDD recognizes a higher level of risk based on country of residence, market sector, transaction patterns or perhaps associations with high-risk jurisdictions or individuals. During the EDD process, the FI can collect more comprehensive information about the customer to acquire a better comprehension of their business activities, corporate composition, beneficial control and causes of funds.
The EDD method also includes regular screenings of any customer against look at lists, calamité and PEP lists to ensure that they are not on any lists which would trigger more protocols. This is an essential a part of effective and continuous monitoring, and a very good EDD option will include a strong internal and external risk analysis engine that can scan multiple databases.