A person in his life encounters several individuals at different stages; some are transparent while others are hard to understand due to their complexity or lack of information about them. The same type of customers come across a business or financial institute where one can be analyzed seamlessly in the business world. Still, some can take additional levels of time and verification to get satisfied. This is where EDD banking comes into action.
The (Enhanced Due Diligence) in an organization performs a set of extensive operations and verification checks on complex profiles of clients that pose a higher risk due to different reasons or characteristics in their respective records.
EDD Banking VS CDD
In the CDD (Client Due Diligence) procedures, the concerned business or financial entity follows the conventional validation method in the KYC (Know Your Customer) and AML screening. The identity of the customer in CDD takes no time for onboarding decisions. However, in EDD banking, due to the opaque structure of a business client, the other firm has to attain a greater degree of confirmation by obtaining additional information with several different approaches and mediums.
Use Cases of EDD Banking
Nature of Client’s Industry
The recession in any country doesn’t affect all businesses with the same intensity. For instance, economical food joints are something which will still have a medium business, much better as compared to other industries. The point is that every business client is judged and being differentiated based on their industry. In EDD banking, those clients who come from unconventional or risky sectors are screened. For example, alcohol or pharmaceuticals, a business or financial institute has to conduct an increased level of verification to ensure that the client is authentic and complying with all regulations imposed on the respective industry. The laws can be of age verification and others. Such sensitive industries are usually confirmed in EDD banking for customer onboarding. The concerned institute or organization also ensures that the sources of the client’s assets are transparent and valid.
Opaque Beneficial Ownership
In EDD banking, business customers with untransparent wealth sources and the structure of companies are authenticated to the core by collecting and analyzing big data about the professional partners and major stakeholders in the screened organization. For instance, if the scanned firm client has properties and capital which is not adequately supported and justified by considerable evidence or documentation, the measures of EDD banking are practised to confirm and monitor the income generation sources of the customer. The verifying financial enterprise or a corporate entity validates the customer by authenticating their firm’s records, financial data, and performance statements. In the procedure, the global growth in the particular industry is compared to the expansion of the screened firm for genuine verification.
Unusual Transaction Patterns
The possibility of money laundering never leaves the room for even a second. The ongoing screening of customers in EDD banking with the help of a systematic transaction monitoring system is the prime reason for the prevention of such violations. This specific measure of EDD banking is utilized consistently post getting the client on board. The concerned firm or financial institute analyzes the fund’s transfer behaviour with an automated screening solution that identifies transfer activities beyond the standard threshold limit.
When the amount and frequency of transactions decided at the customer onboarding time are surpassed by a considerable difference, the solution punches them into a report in EDD banking. The document verification containing data of substantial transactions is called SAR (Suspicious Activity Report).
In enhanced due diligence AML, the report is forwarded to the concerned regulatory authority.
PEP List
If the client is found to be a PEP (Politically Exposed Person), verifying entity or financial firm gathers multiple data sets for simple customer onboarding in EDD banking. Such individuals always showcase a comparatively greater chance of performing economic offences.
In Edd Banking, the corporate history, national ID records of senior executives and partners are validated. The procedure is the same for even relatives or immediate family members of a PEP.
Client from Backward Region
Due to an underdeveloped economy and technological innovations, the structure of industries and regulators in a county is pretty rough to be relied upon. Therefore, the client records and database of such regions are reevaluated and confirmed with an additional EDD banking investigation to make the decision. The concerned party can authenticate such business with global registers, adverse media checks, and detailed questionnaires to obtain meaningful data.
Conclusion
The Due Diligence financial services reduce the volume of financial violations and other offences by a significant difference. The abundant data collected and investigated with increased mediums and approaches always render reliable output in EDD banking. The measures such as studying the financial statements of performance, keeping track of media updates regarding the client, and a systematic funds monitoring system in EDD banking facilitate the inspection firm with swiftness and assurance from the client’s side.
