In today’s fast-paced world, the threats of money laundering attacks and identity thefts are exploiting business operations. Money launderers manipulate the identity credentials of legitimate customers by transferring illicit funds from one place to another. These activities create high business risks and must be examined in detail to prevent such entities from committing unauthorised activities. A study showed that approximately 1,823 cases of money laundering were examined in Hong Kong in 2017. To overcome these attempts, businesses need to conduct extensive EDD compliance of all the high-profile customers before on-boarding them and giving them access to the business operations.
Significance of Enhanced Due Diligence in Identifying High-Risk Customers
EDD Compliance, otherwise known as enhanced due diligence, is a subset of customer due diligence programs that deals with the evaluation of high-risk customers. These services aim to examine the customer’s identity against several checks to authenticate whether or not they are legitimate. The enhanced due diligence process requires customers to submit their identity documents, including their identity cards, tax return documents, proof of income, proof of address, residential documents, and transaction receipts. The submission of these documents allows businesses to analyse the customer’s financial activities and risk profiles, allowing them to identify the involvement of customers in money laundering and related crimes.
EDD compliance is tailored for customers who possess high-risk profiles and may belong to those countries where identity theft and illicit monetary transactions are common. Companies must incorporate bio-metric identity authentication services that allow them to detect the customer’s facial characteristics which are compared with the stored documents in the official government databases. If the customer’s facial characteristics do not match with the official documents, they must be screened against several lists, such as exit control lists (ECL), criminal watch-lists, politically exposed person (PEP) lists, and sanction lists. These lists contain the categories of people who were previously involved in illicit financial and related crimes, allowing accurate identification of high-risk customers.
Investigate the Risk-Assessment Framework of EDD Compliance
EDD compliance operates in a dynamic process because it begins with the accumulation of customers’ financial and transactional documents. The examiners use a risk-based approach while identifying the customer’s identities. This allows them to detect the inconsistencies and discrepancies in the customer’s financial activities. They analyse whether the business accounts are being used for legitimate transactions or not. Once the customers are screened through bio metric verification, the high-profile customers are screened against international watch-lists that identify their involvement in illegal activities.
After the customer passes these checks and is authorised to access the financial services, the companies must continuously monitor their transactional and financial activities. This prevents them from engaging in illicit activities in the future. The EDD compliance follows the guidelines of the financial action task force (FATF), which allows them to examine the customer’s source and transactions of funds.
Applications of KYC Online Verification and EDD Screening in Different Scenarios
Enhanced due diligence (EDD) compliance can streamline the workflow of various industries and can optimise the detection of fraudulent activities. These KYC-compliant operations allow businesses to protect their business services and customer’s identities from identity theft and money laundering. The financial sector can utilise EDD compliance services to screen the customer’s risk profiles, allowing them to effectively identify illicit entities. These services protect legitimate customer’s bank accounts from exploitation.
The crypt currency market can use these screening methods to investigate the financial activities and legitimacy of investors before engaging in business relations. The forex and real estate industry must optimise the utilisation of EDD banking compliance as it can identify the risk-profiles of investors, traders, and brokers.
Benefits of a Streamlined Enhanced Due Diligence AML Process
EDD compliance is crucial for business operations because it stimulates business workflows and enhances their overall productivity and functionality. These services counter identity theft attempts and prevent unauthorised entities from conducting money laundering attempts. Enhanced due diligence services conduct extensive screening of customer’s identities, which prevents financial losses and promotes smooth operations of business activities. EDD compliance abides by the regulations of KYC banking, which protects businesses from the financial consequences and repercussions of non-compliance fines and penalties. These services can provide real-time authentication results, which improves the customer’s satisfaction and conversion rates.
Concluding Remarks
EDD compliance incorporates the use of digital identity authentication techniques that allow businesses to detect customers’ risk profiles and financial activities. These services examine the customer’s identities against several international watch lists, which allow them to screen out illicit entities. They prevent the scammers from committing money laundering attacks due to the incorporation of advanced bio metric identity validation services. EDD compliance aims at identifying the high-profile customers in detail to ensure that they can not access business operations and financial services through illicit servers. These services streamline the business workflow of various industries, allowing them to undertake their regular tasks without falling under the false influence of identity manipulators.
