With financial crimes increasing worldwide, businesses want to execute those policies through which they can onboard authentic customers and generate profitable revenues. But this process has many concerns, as to what type of customers are the firms dealing with, knowing about the details of the investments they are relying upon, the reliability of the stakeholders and vendors. The online world has opened many possibilities for scammers to conduct criminalities at an alarming rate. Falsifying an entity, forging their documents, robbing someone’s personal information, and creating fake profiles are some of the immoral tactics used by fraudsters in financial institutions often. To resolve this issue at most, e-KYC solution need to be implemented by banks to reduce the potential risks of identity thefts and data breaches.
Checking the Client’s Authenticity
Before the act of transaction is executed in the long run, banks need to validate their customers by having an insight into their background information. Any link found with terrorist funding, corruption, or is not in accordance with anti-money laundering regulations needs to be dealt with consequently. The due diligence financial services offered by KYC will allow the companies to protect themselves financially as well as reputationally. In e-KYC, clients’ authenticity will be checked thoroughly while ensuring their legitimacy to conduct relationships with the organizations with zero possibility of any fraudulent activity.
Level of Risks in Due Diligence Financial Services
The concept of customer due diligence for banks conspires to determine the level of risk associated with a client. Upon constant monitoring and analysis, individuals are ranked into two categories consisting of low-risk individuals and high-risk individuals. Not all users need to be tested upon the standard set of rules of the KYC due diligence program. Relying upon the complexity of their condition, they are categorized. This eventually leads the people who have a reliable set of sources of funds to not go through a detailed process, saving their time and money.
An Advanced Version of KYC Due Diligence
CDD cannot prove to be effective in evaluating the identities of blacklisted individuals, nationals of sanctioned states, etc. An advanced version of client due diligence, known as enhanced due diligence is used to expose details about high-risk individuals, businesses, governmental authorities who are prone to corruption such as politically-exposed persons (PEPs), who are ranked as high-risk by FATF (also known as Financial Action Task Force).
The Corresponding Steps of EDD in the Financial Sector
Depending upon various jurisdictions, a common process of EDD Banking works upon a few steps which are:
- Identifying the Level of Risks
In order to execute the process effectively, new customers are categorized and given ranks on verifying their identities. It will the firm to know how many details are needed for a particular individual.
- Creating an EDD Checklist
Building trust, enhancing the brand image of the company, serving the customers the right way, are all the essentials in accordance with KYC compliance and AML measures to deal with high-risk individuals, and providing information collectively in an EDD checklist.
- Examining the Source of Funds
Reviewing the source of funds to check the legitimacy of earned money. Any illegal money transactions should be carried out in banks. For this purpose, the value of the financial assets of the company is also checked to prevent any acts of money laundering.
- Constant Ongoing Monitoring
The transactions are constantly monitored while the previous transactions, their durations, and their payment receipts are also checked to detect any risk of criminal activity.
- Reviewing the Local Reputation of the Firm
Having all the paperwork about an organization is sometimes not enough. Due to this, the details about the local reputation of the firm are also needed which is checked on their social media links, news, and much more.
- Proof of Address
The location of the business or the address of the individual is determined by physically visiting the place after which the authenticity of the address is checked by matching and comparing it with the proof of address in the identity document. Peoples also searching for Wpc2025.
Wrapping it Up
Performing transactions in financial institutions needs constant monitoring especially on the high-risk individuals as they are more prone to fraudulent activities. The KYC process of enhanced due diligence pulls out more details of the individuals in a quick and effective way. It not only improves brand image but also develops credible relationships with other businesses and customers in the long run. Foreign delegates, political persons, government officials, and many more customers’ reliability are checked under the EDD checklist before they are onboarded. With robust identity verification checks, new customers can be secured easily. Moreover, their assets can also be protected by following a feasible guideline presented by EDD banking.