Under the Bank Secrecy Act (BSA), all financial institutions in the United States are mandated to adopt a risk-based approach for Customer Due Diligence (CDD) and ongoing monitoring. This regulatory framework necessitates the implementation of Enhanced Due Diligence (EDD) when customers, whether individuals or businesses, are identified as having a higher risk profile. Enhanced Due Diligence involves conducting further and more comprehensive checks to ensure compliance and mitigate risks effectively.
Financial institutions must perform EDD when dealing with customers that fall into specific high-risk categories. These include:
While there are no strict guidelines detailing what EDD must encompass, it generally includes the following:
It is important to note that it is not illegal to engage with individuals classified as PEPs, RCAs, or SIPs; however, Enhanced Due Diligence is required to ensure that any potential risks are adequately addressed and mitigated.
AMLBuddy streamlines the EDD process by automatically conducting sanction, PEP, SIP, and RCA screening for every Anti-Money Laundering (AML) check. Moreover, the system continuously monitors these screenings, providing daily updates and alerts if any significant changes arise. This proactive approach aids institutions in managing compliance effectively and maintaining a robust risk management framework.
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