Growing criminal activities and fraud ratio compel businesses to uplift their security protocols and integrate advanced verification technology and systems within their operations.
It is not enough to perform basic document verification of a company as it may have high-risk beneficial owners within the structure who are involved in illicit activities. There is a need for Enhanced Due Diligence (EDD) checks, which ensure a thorough investigation of entities and can help organizations secure their landscape from high-risk entities, fraudsters, and complex ownership structures.
EDD compliance is necessary for organizations that have to operate with large businesses either for partnerships or investments. EDD checks to ensure a clear evaluation of all the details and transparency of organizations. It helps organizations verify a company’s details by comparing them against various databases and records such as sanctions, watchlists, and many publicly available information sets.
What is Enhanced Due Diligence?
Enhanced Due Diligence is a risk management process that helps businesses thoroughly investigate the company details they have to work with. It involves automated screening methods and checks that perform complete verification and evaluation. It does not only involve identity verification and basic background screening checks but also provides a more in-depth approach for thorough investigations. It analyses an organization on the basis of various factors and provides a complete risk management solution.
With the help of enhanced due diligence processes, financial actors and businesses can ensure the identification of funds sources, a company ownership structure, and the authenticity and reliability of all individuals. It involves a step for screening politically exposed persons (PEPs) and provides a thorough investigation to highlight potential vulnerabilities. Therefore, enhanced due diligence service ensures a cutting-edge and advanced risk assessment and evaluation process, which ensures organizational security from criminals and fraudster attacks.
Enhanced Due Diligence Checklist
An enhanced due diligence checklist aims to verify all the details of an individual and entity, whether it is a customer or another business. It involves the following kinds of verification protocols and necessary areas that are to be evaluated:
Checks for Customer Identification & Verification
- Full name and identification details of potential individuals. It includes different ID details-oriented documents such as a passport, national IDs, and driving licenses.
- Residential and business address verification checks may evaluate utility bills, bank statements, and other documents that have address details.
- The EDD process for customer and business verification also involves screening the following details, including date of birth, nationality, and tax identification number. It is checked by company representatives and individual customers.
- Verification of an individual’s source of wealth and source of funds to evaluate its nature and legitimacy.
Checks to Verify Business and Corporate Entities
It involves verification of the following details:
- Company registration documents and incorporation certificates help to check the legal status of an organization.
- Beneficial ownership details include information on shareholders and UBOs to evaluate company structure.
- Verification of different financial statements that are not older than 2-3 years and tax records verification to find the financial stability of an organization.
- Checking of regulatory licenses and compliance certifications
Risk Assessment Checks
- Cross-screening of details across sanctions, high-risk jurisdictions records, watchlists, and different records.
- Adverse media and negative news screening to identify where a company stands regarding its reputation.
- Checking all the details which can highlight previous legal or regulatory violations, if any.
- Checks to Monitor Transaction & Financial Activity
- Review of high-risk and unusual transactions, specifically of organizations that deal with cross-border transactions.
- Evaluation of financial details of companies that are involved in offshore dealings
- Cash-intensive business operations analysis is performed at the center of every organization to check its financial stability.
Enhanced Due Diligence Requirements
Enhanced due diligence is part of legal compliance as it is required by law to be performed when dealing with only fair and legitimate entities. Organizations that identify any kind of risk in the verification process need to perform due diligence checks for particular individuals and their entirety. It helps secure a business from future complications. Enhanced due diligence solution involves screening adverse media, sanctions, and watchlists. Therefore, it provides protocols for the identification of high-risk entities and assists businesses in making well-informed decisions regarding collaborations.
Although the Know Your Business (KYB) service ensures ID verification, it also involves the UBO screening step, which is part of corporate due diligence. It enables organizations to secure the landscape from fraud and high-risk entities.
Final Words
Organizations, entities, and individuals who have high-risk profiles need to undergo corporate due diligence checks. These checks ensure adverse media screening, a watchlist, and a sanctions review to identify if the potential entity is appropriate for establishing any business relation with it. With the help of automated checks within the EDD compliance, an organization can streamline its operations and evaluate potential entities to check their authenticity and nature of operations.
