Financial Crime World

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Enhanced Due Diligence: A Vital Process for Businesses

In today’s complex financial landscape, businesses must navigate a multitude of regulatory requirements to ensure compliance and mitigate risk. One crucial aspect of this is Enhanced Due Diligence (EDD), a process that involves a higher level of scrutiny when forming business relationships.

Third-Party Diligence: Outsourcing the Process

For many companies, outsourcing EDD to an external party can be a viable solution. This approach allows businesses to focus on their core operations while ensuring they meet regulatory requirements. However, it’s essential for clients to remain liable for maintaining compliance and fulfilling Anti-Money Laundering (AML) and Know-Your-Customer (KYC) obligations.

Politically Exposed Persons: A Higher Risk

Politically Exposed Persons (PEPs) are individuals with a higher risk of involvement in bribery or corruption. Businesses must exercise enhanced due diligence when dealing with PEPs, as they present a greater risk to the financial system.

Due Diligence Requirements

In Nepal, the Asset (Money) Laundering Prevention Act, 2008 and the Asset (Money) Laundering Prevention Rules, 2009 outline specific requirements for identity verification. These include:

  • Verifying an individual’s name, address, and citizenship using official documents such as passports, ID cards, or birth certificates
  • Applying these procedures multiple times as per regulatory requirements

Multiple Instances of Identity Verification

Identity verification is not a one-time process. Businesses must apply these procedures multiple times as per regulatory requirements, including:

  • Onboarding new customers
  • Transaction data processing
  • High-risk situations where individuals may represent above-normal exposure to money laundering-related threats

Shufti Pro’s AML Screening Service

To help businesses navigate these complexities, Shufti Pro offers an AML screening service that screens an individual’s selected ID attributes against watchlists of global regulatory authorities, foreign and domestic databases, compromised PEPs, and sanctioned individuals. This service can be utilized before or after establishing a relationship with customers.

Reliance on External Services

In the absence of explicit regulations, clients may seek the services of a third-party provider to fulfill AML/KYC obligations. However, it’s essential for businesses to remain liable for maintaining regulatory compliance and fulfilling AML and KYC obligations.

Record Retention

As per Nepalese regulations, businesses are required to retain data for not less than five years as part of their AML and KYC obligations for due diligence. In cases where this information is processed, collected, and managed by a relevant third-party provider, businesses must collect all necessary information (Due Diligence Data) without undue delay.

Conclusion

In conclusion, Enhanced Due Diligence is a critical process that enables businesses to mitigate risk and ensure compliance with regulatory requirements. By understanding the requirements for identity verification, PEPs, and AML screening, businesses can navigate these complexities and maintain a secure financial environment.