Enhanced Due Diligence (EDD) for High Risk Clients

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Understanding high risk clients

High risk clients or customers are the ones who may cause a threat to your company and its operation. With the growing culture of technology, individuals could cause a compliance issue by committing fraud or causing a cyber-security breach.

An organization dealing with financial businesses is required to take high risk enhanced due diligence services based on a risk-based approach to customer due diligence and ongoing monitoring. It is significant for the financial organization to conduct High Risk client-enhanced Due Diligence Services, preventing financial institutions from fraud, terrorist financing, money laundering, market manipulations, etc.

High risk clients differ from industry to industry, but when we talk about anti-money laundering advisory, to be precise, in the financial sector like banks, Customers with high risk are the individuals who cause the highest level of money laundering risk. The company needs to implement enhanced due diligence when the business involves high-risk customers. This may be due to the geographical location, business activity, and customer reputation.

Some of the activities by the high risk clients or customers as per the High Risk Client enhanced Due Diligence Services by our company Enterslice are as follows: customers engaged in the transactions and business linked with the high risk countries, customers whose business structures are vague, unnecessarily complex ownership structures and transactions of the customers that are unusual, complex and lack a lawful purpose and economic disparity.

Enterslice is a consultancy company that provides services in various sectors such as risk and assurance, legal advisory, compliance, due diligence, etc. We have a record of the highest satisfaction of our clients with the delivery of service on time. We not only provide a service, but we craft solutions for our clients.

Customized risk assessment

Enterslice team of AML advisory shall customize risk assessment for the clients, according to their business ownership structure meeting with its terms and clauses. Our team will evaluate the kinds of business the organization deals with, and thus, after due analysis, we shall identify the various kinds of high risk customers who would come across or are already present with the organization dealing with financial businesses. The Enterslice AML advisory team often identifies a few of the types of high risk customers that financial institutions encounter on a day to day basis.

High Risk Client enhanced Due Diligence Services by the enterslice advisory team, identify these seven high-risk customers as follows

Customer Transactions with the High risk Countries

High risk countries are those countries whose jurisdiction is in non-cooperation by the FATF (Financial Action Task Force). FATF is an inter-governmental body that sets the standards of AML Body, providing a regular statement about the countries in high-risk or non-cooperative jurisdictions. High-risk customers are the ones who don't have a regime on AML. Countries whose financial structures are open to criminal abuse, tax havens, terrorist organizations and sanctions are also countries at high risk.

Our compliance team of High Risk Client enhanced Due Diligence Services shall regularly keep an update on FATF (Financial Action Task Force). Our team shall keep monitoring the changes made by the FATF, publishing the list of countries that are at high risk and require full monitoring of such countries’ transactions.

Complex ownership structures

Customers, to manipulate the market, usually adopt structures that are complex, unnecessarily difficult to understand, and as hard as a nut to crack. This complex business structure makes it difficult for financial institutions to identify money laundering. It is important for financial institutions to identify the ultimate beneficial owner of the company; while it is easier for the company to identify the real owner of the accounts of an individual, at the same time, it is difficult to figure out the real owner of the companies, partnership firms, etc.

If you are finding it difficult to identify the original owner of the organization, then don't worry. Enterslice shall provide enhanced due diligence in identifying the original owner of the organization. It is not illegal to have a complex structure for a company, and most companies usually don't have malice or ill intention, but one should always be aware that it is possible to be used for money laundering purposes.

Suspicious Account Activity

Enterslice experts, enhanced due diligence service for the clients shall be obtained by preparing a risk profile to monitor the customer's ongoing transactions and consistently complying with the risk profile. Whenever the transactions of the customers are unusual, such as transactions of huge amounts of cash, transfers of funds abroad, or transactions with high-risk individuals or countries, these are the identification to know how the customer's risk profile is changing and thus require a monitoring service.

Person politically exposed

A politically exposed person is an individual who engages in political activities or serves as a politician in a particular country. This kind of person is vulnerable to money laundering, corruption, etc. Not only he but also his family members could take advantage of his position and create a business with a malafide intention of money laundering. These politically exposed persons are more often bribery-influenced in the spending of government funds.

Customers Reputation & Risk

The companies need to maintain their reputation; the companies need to enhance due diligence very religiously to safeguard the companies from damaging the reputation they have built over the years. Our team of experts shall keep monitoring the risk profile of the customer, such as if they are constantly in the media for various allegations such as money laundering, trafficking, terrorist financing, etc. This shows that the customer is at high risk and they need to be closely monitored.

Enterslice service on enhanced due diligence experts shall screen the adverse media information automatically and thus notify the clients if any changes have occurred.

Non residential Customers

A company needs to create an additional risk profiling due to its potential jurisdictional complexities. If any customers who are non-residents attempt to sign up for an account, the companies should be aware that this kind of customer comes under high risk and requires enhanced due diligence.

Regulatory compliance

With the growing landmark in technology in day-to-day business, the organization needs to have a structure of regulatory compliance. Today's digital age has put extensive pressure on financial organizations to maintain anti-money laundering (AML) and regulatory compliance. Enterslice has a compassionate team to provide the best service for the effective AML and regulatory compliance program. This requirement for the financial sector for the compliance program has increased rapidly after the introduction of digital payment and online transaction methods.

Enterslice experts understand that the financial sector needs to maintain an AML regulatory enhanced due diligence. Our service includes monitoring real-time transactions, customer due diligence, KYC, risk and assurance, and legal advisory services assisting businesses or organizations to stay ahead of the potential risks.

It is indeed difficult to maintain AML and regulatory enhanced due diligence because of its complexity and challenging procedure. Enterslice shall provide you with the best practice a company can have for maintaining the AML and regulatory enhanced due diligence in the following ways

  • Our team will help the company conduct the risk assessment regularly to identify the AML risk with the company, and we shall mitigate the potential risk involved with the transactions and service.
  • We shall frame a customer due diligence method for the organization to identify the high-risk customers.
  • The company should also make sure that the employees understand the importance of maintaining enhanced due diligence for AML and regulatory compliance, thus creating a compliance culture within the company and protecting the company's reputation.
  • Our service doesn’t end with the implementation of the AML compliance structure for the company. We also ensure that the company remain up to date with the regulatory changes.

Technology integration

Earlier, the enhanced due diligence of the financial organization was based manually and very time-consuming. With the growing advancement in technology, customer risk assessment has become more efficient, automated, and accurate. Technology has changed the lookout of the AML regulatory and compliance enhanced due diligence.

Technology has improved the accuracy of customer due diligence, thus reducing the risk of false positives and negatives. This advanced technology involves artificial intelligence and machine learning, helping companies identify and flag suspicious transactions; thus, the company could identify high risk transactions.

Companies are also able to reduce costs by the introduction of technology that lowers the manual service. Technology has automated services such as KYC, making it faster and easier for the customers, thus enhancing the customer experience. Technology plays a very important role in building trust and credibility between the customers.

KYC Due Diligence factors

Factors to be considered by the financial companies to enhance due diligence are as follows

  • Business location.
  • Nature of business and occupation.
  • Business transaction purpose.
  • Consistency in the pattern of transactions, volume, frequency, etc.
  • Anticipated payments and method of payments.
  • necessary papers on partnership agreements, articles of incorporation, business certificates, etc.
  • Evaluation of the customer details.
  • To identify the original/ beneficial owners of a customer's account.
  • Keep a detailed record of the business relationship and other personal relationships that the customer maintains.
  • To identify the approximate salary or annual sales of the customer.
  • To make sure that the ANL policies and procedures are in place.
  • Third-party Paper works.
  • To keep monitoring the adverse customer media effect and its local market reputation.
  • The company needs to maintain an accurate and complete list of customer details.
  • necessary paperation of the examination of transactions, which encompasses unforeseen activities, the origin and destination of funds, and patterns over time.
  • Any disparity and suspicious activity with the customer needs to be critically examined to prevent fraud activities in the company.

Continuous monitoring

Continuous monitoring is one of the important elements of enhanced due diligence; this monitoring is conducted through the analytical approach, such as an algorithm method in the technology. This technology helps the company to monitor both internal and external data. The company shall be able to quickly identify if any changes are made in the customer risk profile or business partner profile, thus immediately bringing the attention to the manager or senior manager for review. This continuous monitoring helps the company make decisions fast with greater confidence and deeper understanding.

One of the major advantages of the continuous monitoring of enhanced due diligence is that by using network links and generation, the company can evaluate and analyze customers' and suppliers' associated network risk, evaluating various high-risk factors such as business location, beneficial owners, top owners, news media coverage, ownership changes etc.

Thus, continuous monitoring to enhance the due diligence of customers not only improves compliance and regulatory compliance for the company but also improves the customer experience and its efficiency and reduces the risk and cost.

Difference between CDD and EDD

Customer due diligence

Customer due diligence is part of the Know Your Customer (KYC) compliance procedure by the company on their respective customers. This CDD is adopted by various organizations but is most effectively used by financial institutions. CDD involves checking the customer's details to open a bank account and enable a transaction of high risk. CDD is basically to identify the customer if they are at high risk and does not involve evaluating their details.CDD is designed in such a way to prevent criminal activities like terrorist financing, fraud, market manipulations, etc.

CDD is an ongoing procedure to verify the customer's details and mitigate the client's risk profile involved in the profile of the customers. CDD, or Customer due diligence, helps financial companies take appropriate measures to prevent risk, especially when any suspicious transactions occur

Our professionals would assist in identifying the risk factors involved with the customers, thus protecting the financial institution from exposure to money laundering activities and terrorist financing.

Enhanced Due Diligence

Enhanced due diligence is an additional method of KYC; enhanced due diligence is conducted on customers who are at high risk for the financial institutions after conducting the customer due diligence to prevent the company's reputation from being exposed to money laundering.

customer is at high risk in various scenarios, such as their location, profession, and political exposure. The regulations for enhanced due diligence vary from place to place, such as local regulations. Enhanced due diligence is commonly practised and regulated by the organization entering into a financial transaction relationship with the customer involving high-risk clients like politically exposed persons, customers from sanctioned countries, and other situations where there is a high chance of risk involved with the customers.

Both Customer due diligence and enhanced due diligence are adopted by the organization globally or, if available, based on local regulations. Enhanced due diligence includes continuous monitoring of the customer's ongoing transactions.

Why choose Enterslice

Here at Enterslice, we have an expert dealing with various start-up companies and organizations under various sectors. Our services comprise legal advisory, consultant, risk and assurance, audit, compliance and regulations, etc. Our anti-money laundering team helps the company maintain the regulatory compliance associated with the AML, thus assisting the company in identifying the potential risks affecting the company and safeguarding the company's reputation from the market.

The enhanced due diligence of the customer by the financial organization has now become a norm, and to get the best due diligence service, a company is advised to hire a professional on AML advisory compliance and regulations. Enterslice experts tailored a solution for the company to have the best due diligence service. Our solutions are to address the risk and maintain compliance, thus helping the company grow. We shall assist the company in investigating and integrating new processes that will serve the business of the company, clients, etc, thus keeping everyone on track.

Our compassionate team will assist the company in determining the normal and expected activity of the prospective account holder. For that, we shall create a structure of customer classification with clearly defined policies and a risk-based approach for better analysis and compliance for the company.

Frequently Asked Questions

Enhanced due diligence is required by the company when there is a huge chance for the company to have a high-risk customer dealing with money laundering or terrorist financing and other market manipulations.

ECDD means enhanced customer due diligence needs to be adopted by the company if they have a potential high risk client.

Some of the types of high-risk clients are complex ownership structures, persons politically exposed, family members, financial criminals, non-residents, etc.

Enhanced due diligence is for high-risk customers; companies often implement enhanced due diligence for comprehensive checks, ongoing monitoring, regular risk assessments, etc.

The three very important types of customer due diligence are standard CDD, Simplified CDD, and Enhanced CDD.

The four customer due diligence requirements are identification and verification of the customer, understanding the nature and purpose of the business-customer relationship, beneficial ownership identification and verification and monitoring of the suspicious activity.

CDD means customer due diligence, and EDD means enhanced due diligence; these are both key elements of KYC that are necessary to prevent money laundering activity through financial organizations.

Enhanced due diligence is the procedure designed to address the company's high-risk clients and its significant financial transactions.

The CDD checklist is the structure for identifying the risks involved with customer transactions and their relationship.

Enhanced due diligence is a complex process adopted by the financial company to identify the risk of customers' money laundering activities.

KYC is also known as Know Your Customer. This KYC procedure is to identify the customer details and perform various due diligence procedures.

Enhanced CDD measures are applied in an organization where customers of potentially high risk are involved, thus preventing the company from exposure to money laundering or terrorist financing.

The best way to deal with high-risk customers is by conducting ongoing monitoring, thus reporting suspicious transactions.

Enhanced due diligence is a part of the KYC and AML process, a safeguard to the company, thus protecting the company from high-risk customers and its exposure to money laundering activities.

Customer due diligence or CDD is a process applied to all customers to identify the risk involved in the customer relationship, whereas enhanced due diligence is a process applied in a very rigorous manner against high-risk customers.

First, employ a risk-based approach, get a verification of the identity, evaluate the source of funds and its original owner, ongoing monitoring, and keep checking the status in media.

Sanctions in AML are policies that provide guidelines for financial institutions to prevent money laundering activities.

Due diligence is implemented by the financial organization to verify the identity of a customer.

Ukraine, Cuba, Iraq, North Korea, Syria, Russia, Belarusian.

AML policies have to be approved in writing by the senior manager of the company.

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