Customer Due Diligence

Any monetary institution or regulated commercial enterprise has to undergo the KYC manner for purchaser on boarding. This is part of the world efforts to comply with Anti-Money Laundering/Counter-Terrorism Financing (AML/CTF) laws, as well as to guard the commercial enterprise from fraud and bad actors. During the KYC process, CDD is a key measure that scrutinises the risk exposure of a customer.
However, in some cases the regulatory compliance extends beyond the onboarding stage, when extra or enhanced assessments are required.

Enhanced Customer Due Diligence

Enhanced client due diligence, or ECDD, are extra checks to minimise danger exposures, violations of regulatory compliance, and prevent monetary crimes arising from cash laundering or terrorist financing. EDD tactics are relevant to all entities, whether or not men and women or businesses, which are deemed ‘high risk’ or mandated beneath the law for more desirable diligence.

ECDD is required where the patron and/or commercial enterprise transaction poses a high threat of monetary crime. Enhance diligence of client is meant to lessen the risk of exposure.

Risk-based strategies to consumer on boarding are primarily based on the regulator guidelines, nature of transactions, business relationships and enterprise type.
However, broadly, ECCD is required in any one, or more, of the following cases:
– where transactions are large;
– where a enterprise relationship is set up with a excessive internet well worth entity;
– where KYC hazard ranking /compliance risk assessment indicates excessive chance exposure;
– where the country wide regulator lays down specific situations where ECDD is to be performed;
– in the case of sure businesses; like cryptocurrency, gambling and offshore banking;
– in the case of certain enterprise relationships, for instance with shell banks;
– in the case of PEPs (Politically Exposed Persons), their close associates or household members;
– the place a business relationship is hooked up with an entity belonging to a sanctioned country.

Advantages of ECDD

Implementing better diligence ensures minimising on possibilities lost, whilst ensuring the group is no longer exposed to dangers of economic crime or terrorist financing activities.

In the match of any ML/TF incident, if EDD rules are adhered to, penalties may also now not be applicable.

EDD can be adapted to size of the institution, making it very appropriate for SMBs engaged in high-risk sectors like cash remittances