Understanding The Basics Of Enhanced Due Diligence

Enhanced due diligence (commonly referred to as EDD) is one of the KYC processes and it was created in order to better scrutinized potential business partnership. EDD highlights the risks we cannot normally identify with the use of customer due diligence by establishing a higher identity assurance with information like customer address, identity, and more. 

While most of us are aware of know your customer (KYC) policies, EDD in banking is different in some clear ways:

  • Robust and Rigorous – All policies in EDD have to be like this so they require detailed information and more information. 
  • Detailed Documentation – Regulators need immediate access to reports. 
  • Reasonable Assurance – as KYC risk rating is calculated, this is used. Basically, it means that professionals who need to make a decision have to go through strict research steps. 
  • Special Attention With PEPs – Politically exposed persons (PEPs) are analyzed more because they are seen as being higher risk. 

For the financial institution or bank, EDD is nowadays a legal requirement that helps avoid unwanted regulatory scrutiny and painful fines. However, there are also other reasons why EDD in banking is so beneficial:

Better Customer Service

Identity verification and EDD processes offer much useful information about customers. This includes employment status, purchasing power, and age, to mention just a few. As a result, the data that is gathered can be utilized in order to offer much better future bespoke solutions that can serve customer needs. 

Enhanced Brand Reputation

Whenever a financial institution screens customers, with the use of EDD, dirty money will not be laundered. This includes money from terrorists, criminals, and corrupt politicians. The ecosystem of the business will not be affected because you take the needed precautions helping you to better know the customer at a clear fundamental level. You do not just know where a company does business and its name. You also know the beneficial owner and you build safeguards to protect you against loss of reputation, compliance fines, and fraud loss. 

Deterred Financial Crime

When you know your customer, you verify their identities and you are sure they are real, you manage to keep terrorism financing, money laundering, and many other fraud schemes away. You basically become a part of a prevention system that protects the entire world while you focus a lot more on growing the business. You can carry out more business in a legal climate that is completely legal. 

Increased Trust

Trust quickly disappears these days for financial institutions, especially banks. This is because there are more and more cybercrime headlines that appear in the news. Banks have to stop money laundering flow and do their part to fight corruption while becoming custodians of important customer data, together with cash, of course. With the adoption of modern EDD and KYC processes, the bank shows customers, including prospective ones, that the focus is put on 100% lawful business. 

Screening and ID verification technologies are evolving so banking customers are able to do business from any corner of the world. However, when banks cannot failsafe sensitive data and fund protection, they cannot gain the trust of modern customers.