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EDD in Banking – A Ray of Hope to Keep High-Risk Profiles at Bay

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Banking

Collaborating with businesses and creating good business-to-business relationships in this era of digitization is not an easy job. Dealing with entities without even knowing their past could put the company under regulatory fines. Thus, to ensure safety, businesses need to perform KYC and particularly EDD to check if there are any high-risk profiles. 

EDD (Enhanced Due Diligence) is a risk-sensitive form of CDD (Client Due Diligence), performed on individuals that are considered high-risk for the firm and ask for detailed data of the customer in addition to essential customer due diligence demands. High-risk profiles are the ones who have a greater chance to be involved in money laundering and other such financial crimes. In that case, FATF demands an additional EDD process to be carried out on the CDD procedure. EDD banking is indeed an important part of the e-KYC solution and client onboarding process. 

Difference Between CDD and EDD Banking

The basic difference between both the due diligence financial services is that client due diligence is a basic document verification procedure that only needs the client’s personally identifiable information such as their name, address, date of birth, etc. to check the risk scale of a particular individual. Enhanced due diligence, on the other hand, is a risk-sensitive procedure that checks a customer who is considered high-risk according to the risk rating of the KYC process. 

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Checklist for EDD Banking Compliance

To conduct enhanced due diligence, the client is asked to visit in person along with the below-mentioned details. 

  • Background details
  • Source of funds
  • Structure and source of their wealth
  • Adverse Media Screening

Benefits of EDD Banking 

Enhanced due diligence besides providing a great verification procedure to prevent the company from high-risk profiles has some other benefits too. Below are the perks that any company could have with performing EDD. 

1.Enhances Customer Experience

As mentioned above, details have made it quite clear that there is detailed information required to perform EDD. The available information not only helps the company verify an individual with high-risk transactions but also assists in offering better services to customers according to their demands. As a result, customers feel satisfied and choose the company again and again. 

2. Keep the Company’s Files Clean

Any company that performs enhanced due diligence could protect itself from illegal earnings or any dirty money entering its ecosystem. It is the dream of every industry to keep their files tidy with white transactions and EDD helps them accomplish this goal. Not only the particular individual is verified, but all the entities linked with the company including stakeholders are also verified. Thus, this enhanced security service protects businesses from money laundering and other organized crimes as well as sophisticated fraud. 

3. Builds Credibility

Enhanced due diligence is a great bet to build a positive image of the company. When all the customers know that the company is following KYC compliance and performs strict EDD procedures while onboarding any client their trust in the company develops. They not only become its regular clients but also brand the company in whatever gathering they are. Thus, EDD proves fruitful in building credibility which in return help businesses generate greater revenue. 

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4. Keep Fraud Schemes Away

With progress in technology, criminals have also become organized. They have revised their methodologies to carry out criminal activities including money laundering, identity theft, terrorism financing, account takeover, etc. Performing EDD would help the company keep all criminal and fraud schemes at a bay. The industry could focus on its growth with peace of mind. With digitization, KYC due diligence processes have become rigid, and adding customer due diligence for banks has become an absolute necessity to secure sensitive information from fraudsters and criminals. 

Final Thoughts

While the reach and complexity of expanded client due diligence methods grow, the technology used to implement them improves. As cyberattacks and banking crime become more prevalent, financial firms must focus on preventing money laundering and fraud and establishing a reputation as serious custodians of their users’ data and money. Following KYC and EDD banking procedures demonstrates that you are legally focused on your consumers and potential customers. Businesses can identify their clients, validate that they are legitimate, check that they’re not on any forbidden lists, and evaluate risk factors that prevent money laundering and other financial crimes. As a result, businesses will not only have a deeper understanding of their consumers and be able to better serve them, but they will also have more time to focus on building their company.

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