ust like every person comes with his/her own set of capabilities and restrictions, a customer or a client entity in a business comes with a group of characteristics defining sources of profit and risk for the concerned organization. The measures of (Enhanced Due Diligence) EDD banking in the financial market enable institutes to obtain complete satisfaction for a customer profile that involves an increased degree of risk as compared to the other ones.
In the preliminary online KYC and AML authentication, the verifying entity attests the individual or prospect company with an AI-powered validation program in seconds, and on the basis of the final conclusion, every client profile is labeled with a specific risk rating and from there EDD banking comes into practice.
Reasons for Practice of EDD Banking
The initial client verification process is also referred to as CDD (Client Due Diligence) where the authentication party validates the personal and professional background of the screened prospect, confirms all the necessary details that are enough to go on such as place of origin, date of birth, physical addresses of the residence or company, and other relevant details as well but sometimes the collected information is not enough to conduct business with the concerned individual or company prospect. The process of EDD banking attains additional data for the confirmation that has to be examined by the duo of trained verification experts/analysts and automated authentication systems.
Factors leading towards EDD banking
Regions with Substandard Customer Authentication Procedures
In the countries or territories that have loopholes in their KYC and AML verification processes, nationals from those places are more likely to be considered as riskier clients to deal with. The same countries are usually to be found in sanctions or warning lists of international financial watchdogs. In that case, the bank or insurance company identifies the particular profile as a high-risk one and proceeds the diligence process. EDD banking is conducted to obtain more supporting data.
PEP (Politically Exposed Person) List
The validation screening of individuals in banks and its results are supported with electronic record files of global authorities and if the name of the person under verification comes under a PEP list, merely a CDD process won’t cover every area. The EDD banking in the PEP case is common as such influenced and equipped souls have the sheer amount of power and it can be conveniently used for their personal gains affecting the national and economic stability.
Countries with Greater Corruption Ratio
The underdeveloped countries are the main factor in the profile of a prospect that calls for EDD banking. Obviously, the regions with backward economies indicate the disparity of wealth, which means corruption is a common part of their system. The countries with an increased number of corruption cases are always red-flagged by the verification solutions in the KYC validation. EDD banking is practiced to collect information about sources of wealth and their legality as well.
Regions that aren’t associated with the FATF or other watchdog, citizens of such places have to bypass more strict verification checks for getting facilitated.
How to Perform EDD Banking?
Provide Detailed Questionnaires
Post the attestation of the personal and professional credentials of the screened individual or company, if the party is placed into a high-risk zone then in EDD banking, the verifiers can present an extensive questionnaire designed in accordance with their custom or KYC/AML regulations. In the case of corporate prospects, additional information about the manufacturing partners and vendors can be collected, to verify the legality of the business major stakeholders and board of directors can be authenticated, contracts of partnerships, and other relevant documentation can also be verified in EDD banking for ensuring safety.
Confirmation of Wealth Source
The concerned organization in EDD banking can verify the generation source of salary or income, annual performance reports, and income statements are studied. The assets of the prospecting party are also authenticated, the bank ensures that the income described earlier is equivalent to the assets showcased. The reports and financial turnover if does not match with the properties one holds, if there is any disparity found, the concerned bank takes immediate action against the individual or firm.
Transaction Monitoring System
In Edd banking, the ongoing monitoring over funds transfer plays a substantial role in AML screening. In enhanced due diligence AML, if high-risk individuals or companies crosses their threshold limit and that too frequently, extensive inspection is called for, in EDD banking the verifying party examines the purpose and source of withdrawal or deposit, and the other party involved in the transaction gets also verified to ensure order.
After the online KYC Compliance and AML screening in due diligence in banking for politically exposed persons or for people belonging from regions under warning lists of global watchdogs, EDD banking is ideal for absolute confirmation of prospects, the process avoids fraud and data breaches by ongoing funds surveillance, verification of wealth sources, and authenticating other associates effectively.