Overall technique to enquire the customers and companies in order to be suspected of being somehow connected to the financial crimes can be described as the procedure of due diligence.
This particular procedure is predicated on obtaining and verifying the detailed information regarding the background of specific clients such as sources of received funds and ongoing operations as well. Today in this blog we will be figuring out how the modern feature of enhanced due diligence can be a game changer for the compliance officer and overall financial world as well.
What Makes EDD Crucial to AML Compliance?
Modern features oF biometric AML are required for the purpose to assist in preventing the hazards that come through extremely dangerous clients. Relevant law enforcement authorities around the world are obliged to mandate that organizations and businesses never forget to adopt EDD in order to prevent scammers from abusing the overall financial system. Consequences of severe nature might get faced if a company or business is not living up to the standards of enhanced due diligence where one party would likely suffer from consequences in the form of fines and harm to the company’s reputation. US Department of Justice played a role in illustrating the significance of enhanced due diligence features through imposing a fine on major financial firms in the year of 2021 worth $390 million on account of anti money laundering compliance violations.
How to Adhere to EDD Regulations
There comes a series of steps and actions that must be completed in order to comply with the standards of enhanced due diligence which further helps in ensuring if the potentially hazardous client is being correctly identified or not. Following are the instructions explain in a brief manner on how to proceed with this process:
1. Determine High-Risk Clients
You must identify your high risk clients with the intention to comply with EDD where the chances of the consumers engaging in unusual and complex activities might be higher comparatively. This whole scenario might end up linked to the dangerous enterprises like gambling or arms selling as well. There was research done in the year of 2022 where it was found out that 49% of the financial institutions increased the frequency of risk assessments in order to score better identification of high risk clients.
2. Compile More Data
Modern features of EDD specifically in the banking sector simply look out for the kind of information regarding beneficial owners, the source of cash, and the goal of the firm. Data of such a nature is quite essential in its nature when it comes to examining the validity of the transactions and financial patterns of every single customer.
There was research done which further helped in revealing the fact that 68% of the banks operating in the EU are spending money with the intention to enhance their data collection practices in order to adhere to the standards of EDD.
3. Confirm Funding Sources
Examining the origin of the money can be defined as an essential step in the procedure of EDD as it helps in guaranteeing the transaction which might be the result of any sort of illegal activity as well. There are high chances that it might involve the additional checkbox of monitoring their respective earnings, investments, real estate sales or purchase for the specific individuals as per the given scenario.
It has been noticed through a poll which was done in the year of 2023 that over 56% of the financial institutions have expressed their dissatisfaction with their past challenges who did not perform the checkbox of due diligence checks and source the funding at the required time.
4. Constantly Track Transactions
Step regarding the feature of enhanced due diligence is considered to be a multi step procedure in the field of anti money laundering where regular transaction monitoring is taken as an essential checkbox in order to identify the questionable anti money laundering activities at the same time.
There was research done in the year of 2023 executed by PwC where the reports played a role to show that almost 74% of the financial institutions had improved their feature regarding enhanced due diligence compliance simply through integrating an automated transaction monitoring system at the same time.
How can AML Watcher be of your help?
Stay ahead of financial threats with AML Watcher’s advanced Enhanced Due Diligence (EDD) solutions. Identify and manage high-risk clients, verify funding sources with precision, and continuously monitor transactions to ensure compliance and protect your organization. Leverage our cutting-edge tools to simplify due diligence processes while safeguarding your reputation and staying ahead in the fight against financial crime.
