Ongoing risk monitoring is highly important for the identification of new risks for businesses and professionals. In fact, risk assessments are the key features that detect whether a business or professional is at risk of being exposed to money laundering activities. In this article today we will take a question and answer approach to explain Enhanced Due Diligence processes.

What is Enhanced Due Diligence (EDD)?

Enhanced Due Diligence (EDD) is a set of activities that are designed to tackle high-risk customers. There is the Know Your Customer (KYC) or Customer Due Diligence (CDD) processes, then there is EDD, which enhances the standard KYC or CDD process.

When should a business apply EDD for its customers? 

In order to combat money laundering and terrorist financing, EDD is required before the start of any business relationship which is considered as High-Risk Customer. EDD should be performed at the initial onboarding stages where there is a suspicion of money laundering or activity, the customer/s involved is a Politically Exposed Person (PEP) or holds adverse media, the customer/s changes completely line of business without a valid reasons.

When should I review High Risk Customers?

Once the client is onboarded, you should monitor and perform ongoing transaction monitoring of high-risk customers on a frequent basis, and fully reviewing them should be at a minimum on a yearly basis.

What needs to be done to perform EDD?

There is a set of tasks to perform to understand the risk profile of the customer, gather and record information as per your risk rating, and analyse suspicious or negative information. In brief, you need to Implement your own risk-based approach, get hold of a list of information which you will need to verify, analyse the Source of Funds and Source of Wealth of the client; and finally keep track of ongoing screening and transaction monitoring.

For more information about our Anti-Money Laundering (AML) advisory services, please visit our web page and get directly in touch with one of our Directors, Ms. Joceline Caruana on jcaruana@fairwindsmanagement.net for one-to-one assistance.