As the world is going digital, businesses should not only focus on the profits they are generating but also on the clients they are interacting with. It means that validating stakeholders is also important. Clients are group into different categories base on the risk that they could pose to any firm. The regulatory authorities have made customer due diligence for banks an essential thing to check that the clients are genuine and do not pose any kind of threat. However, some clients appear on the global wanted lists and CDD is not sufficient to deal with such risk profiles. This is where EDD banking comes as a hope.
EDD is an e-KYC solution that is carry out to conduct comprehensive verification of the clients who are classify as high-risk profiles by the KYC risk rating system. It helps the banking and financial firms monitor large volumes of transactions and analyze the danger associate with them.
Customer Due Diligence vs Enhanced Due Diligence
The main difference between the due diligence financial services is that client due diligence is a less restrict authentication process that only requires identity documents as well as addresses to verify a client. EDD, on the other hand, is a risk-sensitive procedure that conducts a comprehensive verification of an individual who is categorize as a high-risk client by the KYC risk rating system.
Requirements for EDD Banking
For conducting KYC due diligence on high-risk profiles, the customer is asked to visit the office in person along with the following details.
- Background information
- Source of funds
- Structure and source of their wealth
- Adverse media screening
When is EDD Require?
Whenever any client or business is found to be involved in terrorism funding or money laundering, EDD becomes a must thing. For example, an EDD becomes really essential when an individual who is on the PEPs list wants to start business activities with a firm. As they are the high authorities, so there is a greater probability of these individuals misusing their power to carry out illegal activities such as money laundering. Besides this, complex corporations, high-risk countries, and clients who cross a threshold while conducting transactions need to validate thoroughly by performing EDD. Validating the source of funds using the AML solution is an important part of the EDD process. The risk-relevant details usually become a tough job to process because of the bad media coverage.
How to Perform EDD
EDD is a procedure that monitors clients’ behavior continuously. Following are the procedures involve in the EDD process.
Risk Assessment
The very first step of EDD is to check the risk level link with a particular client. When the customer is identify as high-risk through several background checks as well as AML monitoring, they are categorize into different groups for thorough identity verification purposes.
Creating the EDD Checklist
The process also involves establishing an effective checklist for high riks transactions as well as clients who are categorize as high risk. The enhance due diligence checklist means all the require information that is important to address clients’ concerns. The list could be create with third-party analytics sources and tools.
Analyzing Essential Information
Determining who are the ultimate beneficial owners and what are the source of funds is a critical step of the enhance due diligence procedure. It validates that the source of clients’ money is financially legal. If three is any inconsistency found in the wealth, it is handle and resolve right then and there.
Continuous Transaction Monitoring
A continuous KYC process is carry out to monitor the transaction record of a client continuously. Information such as the duration of the transactions, their types, and the parties associate with them are also require to be put through a comprehensive inspection.
Adverse Media Screening
Checking if the client has bad media coverage is also a part of the enhance due diligence process. If they are cover anytime by the adverse media, it means the client is really a great threat to carry out business activities.
Final Thoughts
As the extent of EDD banking expands, the technology that handles it improve as well. Thus, there are numerous options for securing as well as growing banking or any organization. With the rise in criminal activity, financial firms are in desperate need of a solution that would keep all scammers and cybercriminals at bay. As a result, EDD, as well as KYC compliance, demonstrate that the bank or other organization cares about its consumers and that the individual client is genuine.