Financial Crime World

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Heard Island and McDonald Islands Tighten Grip on Financial Transactions with Enhanced Due Diligence

In a bid to strengthen its financial regulations, Heard Island and McDonald Islands has introduced enhanced due diligence procedures for all financial transactions. The move is aimed at preventing money laundering and terrorist financing in the region.

Why Enhanced Due Diligence is Important

The Bank Secrecy Act has led to the inception of Enhanced Due Diligence (EDD) as a compulsory procedure by the Patriot Act of 2001. Private banking institutions, new overseas accounts, and correspondent accounts are required to obey EDD laws and regulations.

Key Points

  • Enhanced due diligence is a Know Your Customer (KYC) process that provides a greater level of scrutiny from business partners.
  • It helps detect risks that wouldn’t be detected by the standard customer due diligence (CDD) process.

How Enhanced Due Diligence Works

EDD is an ongoing process affected by various factors, including:

Factors Affecting EDD

  • Customer factors: such as bulk non-resident customers and politically exposed persons
  • Geographical factors: such as diplomatic relations with sanctioned countries
  • Other risk factors: such as money laundering and terrorist financing

When to Perform Enhanced Due Diligence

EDD is required before any business relationship or deal can be reached between two parties, including financial transactions or money deposits. It’s a one-time process unless unforeseen events occur.

Procedures Involved in EDD

  1. Starting with a risk-based approach to recognize high-risk customers
  2. Creating a checklist for AML BSL policies for high-risk customers
  3. Analyzing the source of funds and ultimate beneficial ownership (UBO)
  4. Ongoing transactions monitoring
  5. Adverse media and negative check review
  6. Conducting an on-site visit
  7. Drafting a report and developing an ongoing monitoring strategy

Tips for Successful Enhanced Due Diligence

To have a successful due diligence form, teams need to be organized and thorough. They must keep up with priorities, coordinate information sharing, and detect suspicious transactions using artificial intelligence (AI) and machine learning (ML). Developing a culture of compliance is also essential.

Key Takeaways

  • Teams should prioritize tasks, communicate effectively, and use technology to streamline workflows.
  • A culture of compliance is crucial for successful due diligence.