Enhanced Due Diligence, or EDD, constitutes a more rigorous and comprehensive set of checks performed on customers or transactions deemed to present a higher risk of money laundering or terrorist financing. This process extends beyond standard customer identification, involving deeper investigations into the source of funds, business activities, and ultimate beneficial ownership. EDD is a crucial component of anti-money laundering frameworks, applied when the risk profile necessitates additional scrutiny. Its objective is to mitigate financial crime risks that standard procedures might not fully address.
Context
The key discussion surrounding Enhanced Due Diligence in the digital asset sector centers on its application to high-value cryptocurrency transactions and entities operating in less regulated jurisdictions. Its situation highlights the challenges of tracing digital asset flows and verifying identities in a pseudonymous environment. A critical future development involves the standardization of EDD requirements across international virtual asset service providers and the deployment of advanced analytics to automate risk assessment and information gathering.
New York regulators now require VCSPS and banks to integrate blockchain analytics for enhanced AML/CFT and sanctions screening, elevating operational risk controls.
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