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Enhanced Due Diligence: When KYC and Customer Due Diligence Aren’t Enough

May 26, 2022 | Blog, KYC

With recent advances in technology —such as facial recognition, biometrics screening, and natural language processing—making financial crimes like fraud and money laundering increasingly more elusive to detect, organizations within the finance, banking, and securities sectors face ever-growing challenges when it comes to staying on top of risk management and regulatory compliance.

In the past decade alone, nearly USD $26 billion in fines and penalties have been leveled against financial institutions throughout North America, the EU, APAC, and the Middle East for AML and KYC-related violations. For those in the business of partnering with customers and third-party entities to handle the transfer of finances and assets, two things have become progressively clear: failure to know who you’re dealing with is a significant risk to your company, and complacency when it comes to due diligence simply isn’t an option.

Enhanced Due Diligence (EDD) is one of the best ways to safeguard against fraud and liability where financial crimes and data privacy and security are concerned. As a higher level of Know Your Customer (KYC) protocols, EDD is designed to dig deeper than the standard level of customer due diligence and perform an extra assessment for high-risk customers and large transactions that could lead to issues due to undetected exposure and illicit activity.

Partnering with a robust EDD and AML software platform like iComplyKYC makes enhanced due diligence and KYC simple, streamlined, and dependable when it matters most. Below, we’ll discuss the importance of EDD as well as the benefits of partnering with iComply.

What is EDD

Enhanced Due Diligence (EDD) refers to high-level KYC processes and procedures designed to provide a more intense level of scrutiny and insight into potential business partners, prospective employees, and other individuals or corporations that cannot be detected through conventional customer due diligence (CDD).

Instead, EDD aims to establish a more comprehensive level of identity assurance and verification by digging deeper and evaluating the overall risk factors associated with high-net-worth customers, large value transactions, and related individuals with unknown or precarious backgrounds. This protects not only your organization’s operations from risk and liability but also helps to prevent damage to your brand’s reputation.

EDD procedures differ from standard KYC procedures in that they are:

More Robust

EDD procedures are incredibly thorough and robust, with each layer of information designed to give you the evidence and high-quality data you need to make better business decisions confidently.

Detailed Documentation

Clients and risk factors that require enhanced evaluation should always have extremely detailed reporting and documentation in place, with immediate access readily available to your team.

Did you know? When using iComplyKYC, you can gain instant access to vital EDD and KYC information, and receive profile updates in as little as 15-20 minutes!

Reasonable Assurance

EDD regulations require reasonable assurance when making partnerships or final decisions when calculating a KYC risk. Your team should always be using the most current, comprehensive information to reach such decisions, aided by vetted EDD processes that cover the full lifecycle of the KYC subject.

Accounting for PEPs

Politically Exposed Persons (PEPs) present a unique risk due to their unique positions, assets, the potential for money laundering, etc.

When is EDD Necessary?

Regulators across the globe require enhanced due diligence to be implemented in a wide variety of circumstances, including:

  • When dealing with businesses or third-party entities on the High-Risk Third Countries list
  • For deals involving companies in sectors with a known high risk for money laundering including gambling, securities, and industries specializing in the transfer of virtual assets
  • Interactions with PEPs or PEP-adjacent individuals (i.e. family members, friends, colleagues, etc.)
  • Shell corporations
  • Private and correspondent banking entities
  • Companies that have any known ties to funding terrorist activities or that have been blacklisted

Outside of mandated instances, EDD is extremely useful for organizations wishing to operate with maximum security and reassurance when it comes to their portfolio and the peace of mind offered to potential and current clients. By regularly exercising EDD protocols, you greatly reduce your risk of exposure to financial crime, ensure your customers have the best protection possible, and ultimately build trust in your brand through superior performance afforded through security and transparency.

EDD Simplified: Meet iComplyKYC

Conducting enhanced due diligence doesn’t need to be a costly hassle. At iComplyKYC, we know the value of trust and transparency and have created a world-leading KYC platform designed to make it easy to get the knowledge you need from trusted sources and to stay compliant with all relevant regulations within your jurisdiction. Our modular suite of KYC products makes staying on top of EDD and managing sourced funds, client portfolios, sourcing KYC updates from natural persons, etc., simple.

With edge computing technology and advanced algorithms integrated into each of our products, iComply operates with the highest data security and privacy measures in mind. Our software processes sensitive user data before it leaves the device, essentially bringing the data processing to the data, not the other way around. This powerful technology enables teams to be able to comply with global data security standards such as GDPR, CCPA, PPIA regulations, and more.

Our suite of KYC software allows you to stay on top of evolving customer relationships and dealings and can give reduce the cost of running KYC protocols by up to 80%. To make sure you’ll always have access to the accurate information you need when it matters most, you can also gain real-time data and updates on potential sanctions, police reports, or events of interest regarding current or potential clients in as little as 17 minutes.

iComply’s software can be set up within your existing workflows in a matter of minutes, and with a user-friendly interface, your team will have everything you need to stay on top of EDD, streamline your operations, and stay compliant with all relevant regulations without wasting time, money, or valuable resources in the process.

Book a demo with our team today to learn more about iComplyKYC and how our platform can be tailored to your specific needs and applications.

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