Enhanced Customer Due Diligence (EDD) With the Help of Risk Insight Experts
Where the risks of money laundering or terrorist financing are higher, companies should be required to adopt enhanced customer due diligence (EDD) measures. In particular, they should increase the number of checks they need to do, in order to determine whether customer business transactions or activities appear suspicious.
Risk factors where enhanced customer due diligence (EDD) measures have to be taken include the following.
Customer risk factors
- Unusual circumstances regarding how the business relationship is conducted, such as significant unexplained geographic distance between the financial institution and the customer
- Nonresident customers
- Legal persons or arrangements that are personal asset-holding vehicles
- Companies that have nominee shareholders or shares in bearer form
- Cash-intensive businesses
- Unusual or complex ownership structure of the company
- Political Exposed Person (PEP)
Country or geographic risk factors
- Countries not having adequate AML-CFT systems
- Countries subject to sanctions, embargoes or similar measures issued by, for example, the United Nations or the US Department of Treasury
- Countries having significant levels of drug trafficking, corruption, financial crimes or other criminal activity
- Countries providing funding or support for terrorist groups
Product, service, transaction or delivery channel risk factors
- Precious metal and gem business
- Real estate brokerage
Examples of enhanced customer due diligence (EDD) measures that could be applied for higher-risk business relationships include:
- Obtaining additional information on the customer (e.g. occupation, volume of assets, information available through public databases, internet, etc.), and updating more regularly the identification data of customers and beneficial owners.
- Obtaining additional information on the intended nature of the business relationship with customers, suppliers and investors.
- Obtaining information on the source of funds or source of wealth of the customer.
- Obtaining the approval of senior management to commence or continue the business relationship.
Higher risk customers and their business activity should be reviewed even more closely at the time of establishing a relationship and more frequently during that relationship.
A company should consider obtaining additional information from high-risk customers such as
- Criminal records
- Civil case records
- Bank reference letters
- Accountant/Lawyer reference letters
- Commercial reference letters
- Occupation or type of business
- Curriculum vitae
- Business plans
- Business licenses
- Source of funds and wealth
- Identifying information on individuals with control over the bank account, such as signatories or guarantors
- Financial statements
- Countries where the customer operates
- A list of major customers and suppliers with indication of the countries where they operate
- A list of associates in all companies where the customer has a directorship position or is a shareholder or a beneficial owner
Any company needing to conduct enhanced customer due diligence (EDD) should seek the external assistance of Risk Insight experts.
Risk Insight experts can conduct enhanced customer due diligence (EDD) to protect your company from legal, financial, organization and reputation risks.