What is enhanced due diligence for high risk customers? (2024)

What is enhanced due diligence for high risk customers?

What is Enhanced Due Diligence (EDD)? Enhanced Due Diligence (EDD) is a set of measures applied in situations that indicate a higher risk of money laundering and terrorist financing. EDD measures include, among other procedures: Obtaining specific information about the customer (e.g., name, date of birth);

What is EDD review for high risk customers?

Unlike the preliminary phase of Customer Due Diligence (CDD), EDD delves deeper into assessing the potential hazards associated with high-risk customers and transactions. Enhance Due Diligence processes are essential in evaluating the risk category of the customer or business and assuring their real identity.

What type of customer due diligence to be applied for high risk customers?

Enhanced due diligence shall be applied to customers that are assessed by the covered person or under this Part as high risk for ML/TF. For customers assessed to be of low risk such as small account balance and transactions, a covered person may apply reduced due diligence.

Are enhanced due diligence measures necessary for customers who are based in high risk countries?

You must apply EDD measures in any transaction or business relationship with a person established in a high-risk third country. For more guidance on appropriate EDD measures, see our guide to customer due diligence and the anti-money laundering guidance for the legal sector.

What is enhanced due diligence answer?

Enhanced due diligence is specifically designed for dealing with high-risk or high-net worth customers and large transactions. Because these customers and transactions pose greater risks to the financial sector, they are heavily regulated and monitored in order to ensure that everything is on the up and up.

What is an example of a high risk customer?

Let's look at some common types of high-risk customers you might face, when to look out for them, and how to prevent them from harming your business, including high-risk individuals such as: Stolen credit card customers. Money laundering customers. Multi-accounting customers.

How do you identify a high risk customer?

Higher Risk Customers are those who are engaged in certain professions or avail the banking products and services where money laundering possibilities are high. Moreover, Financial Institutions conduct enhanced due diligence (EDD) and ongoing monitoring for higher risk customers.

How do you deal with high risk customers?

All high-risk customers are reviewed with the necessary level of due diligence, at the right time, reducing the overall compliance cost to the institution. Institutions should employ configurable risk agents based on the risk assessment outlined in their policies and procedures.

What are the triggers for enhanced due diligence?

Enhanced Due Diligence (EDD) is an advanced level of customer due diligence that focuses on high-risk customers and transactions. EDD is triggered by factors such as high-risk customer profiles, unusual transactions, politically exposed persons (PEPs), or dealings with sanctioned entities.

What are the 4 customer due diligence requirements?

What are the 3 types of customer due diligence?

There are three main types of CDD measures that organisations may use: standard CDD, enhanced CDD, and ongoing CDD. Standard Customer or Client Due Diligence refers to the basic level of information organisations must collect and verify about their customers.

Is enhanced due diligence required for all customers?

When is enhanced due diligence needed? EDD is needed for higher-risk customers; customers that pose higher money laundering or terrorist financing risks and thus present increased exposure to banks.

Who is not a high risk customer?

Entities that are exempted from the threshold transaction reporting by FIU if such entities are not considered as high risk. Government bodies, government owned companies, regulatory and supervisory bodies, semi government corporations, Banks and Financial Institutions licensed by central bank etc.

What is enhanced due diligence for high risk customers FCA?

Handling higher risk situations – enhanced due diligence (EDD) Firms must apply EDD measures in situations that present a higher risk of money laundering. EDD should give firms a greater understanding of the customer and their associated risk than standard due diligence.

How do you complete enhanced due diligence on customers?

An Enhanced Due Diligence checklist for Anti-Money Laundering (AML) purposes should include steps such as customer verification, source of funds verification, beneficial ownership assessment, transaction monitoring, PEP screening, risk assessment, and documentation of findings.

Which customers require EDD?

When is Enhanced Due Diligence (EDD) applied? Enhanced Due Diligence is usually required for 'high risk' customers, i.e. those who are more likely to be involved in money laundering, terrorist financing, or fraud-related activities.

What is the difference between enhanced due diligence and customer due diligence?

The main difference between CDD and EDD is that CDD is applied to all customers, while EDD is reserved for high-risk customers who require further scrutiny. Regulated entities are required to know who they have a business relationship with.

What is the KYC period for high risk customers?

According to the RBI Master Circular on KYC, “periodic updation shall be carried out at least once in every two years for high-risk customers, once in every eight years for medium-risk customers and once in every ten years for low-risk customers from the date of opening of the account / last KYC updation.

Which of the following would qualify as a high risk activity?

Hazardous activities include scuba diving, BASE jumping, hang gliding, race car driving, flying a plane, horseback riding, bungee jumping, parasailing, and off-roading.

What is the customer due diligence rule?

The CDD Rule requires these covered financial institutions to identify and verify the identity of the natural persons (known as beneficial owners) of legal entity customers who own, control, and profit from companies when those companies open accounts.

What is risk based customer due diligence?

A risk-based approach

This means that those customers that potentially pose a higher risk will be subject to enhanced due diligence processes. Differing levels of due diligence will be applied depending on the nature of the customer's relationship with the bank and their risk profile.

What is high risk customer interaction?

A high-risk customer interaction is any interaction that could, where unauthorised access is gained, result in a customer losing access to their telecommunications service or theft of their personal information.

What must enhanced CDD should include?

Enhanced CDD measures

Financial institutions should examine, as far as reasonably possible, the background and purpose of all complex, unusual large transactions, and all unusual patterns of transactions, which have no apparent economic or lawful purpose.

What is a due diligence checklist?

A due diligence checklist is a way to analyze a company that you are acquiring through a sale or merger. In the context of an M&A transaction, “due diligence” describes a thorough and methodical investigation and assessment.

What are enhanced CDD measures?

Enhanced CDD measures must be applied where a firm's assessment is that there is a higher risk of money laundering or the financing of terrorism (i.e. a situation which by its nature can present a higher risk of money laundering or the financing of terrorism).