What is EDD in KYC?

Covery Blog / Antifraud, Covery, Fraud prevention / What is EDD in KYC?

What is EDD in KYC?

As an online merchant, you must be quite familiar with the KYC (Know Your Customer) paradigm and CDD (Customer Due Diligence) requirements. Basically, when dealing with a customer, you must ensure you are not paid for your products and services with money obtained from money laundering, as you will be held liable as an accomplice to the deed. 

To prevent this result, online merchants should always check whether their customers indeed are who they claim to be and their sources of income are legal. For larger payments, EDD or Enhanced Due Diligence procedures come into play. But how to do this? Read on to learn how Covery helps you with EDD, KYC automation, and AML compliance.

EDD in KYC meaning

Let’s start by outlining the differences between CDD, KYC, and EDD.

Customer Due Diligence is the whole range of processes a financial institution must perform to collect information on their active or potential customers.

Know Your Customer or KYC is the continuous effort from financial institutions to verify their customers, their identity, suitability, and risks of doing business with them.

Enhanced Due Diligence is an in-depth checking process that involves a greater deal of scrutiny and can uncover information a standard KYC done as a part of CDD might miss.

Therefore, Enhanced Due Diligence meaning is to verify deals with customers who were assigned a high-risk score by your KYC anti-fraud solution. It is used when the sum of the deal is high enough to satisfy the risk appetite of the organization but the customer’s background is not solid enough at a glance.

Enhanced Due Diligence checklist

Below we provide an enhanced due diligence checklist a financial entity must follow to validate a risky customer:

  • Check against international PEP/RCA/sanctions/ embargo watchlists
  • Scan media for mentions of political exposure and/or fraudulent activities
  • Study registration records of the corporate entity, its directors and shareholders
  • Check whether the company actually does what it says — with on-site photo intelligence and staff interviews
  • Review whether the entity has a high debt exposure and/or heads towards bankruptcy
  • Check for any criminal or civil lawsuits or litigation charges against the company through several appropriate sources
  • Check with the regulator for cases of censure or public violation on record 
  • Assess the publicly available data on company history and its management track record

Moreover, all the proceedings of the EDD checks must be documented in detail, and regulatory bodies must be able to assess this information with ease at any moment. Third-party professionals are often hired to double-check the data provided and the reliability of sources. As you can see, EDD can be quite a time- and effort-consuming process. But what should an online merchant do in order to benefit from EDD without investing a considerable amount of resources? 

This is exactly where Covery comes to your aid.

Covery: an automated KYC and anti-fraud system

As end-to-end risk mitigation and anti-fraud tool, Covery handles all aspects of CDD, KYC, AML compliance, and EDD. Being a Dow Jones-certified service provider, Covery has direct access to the latest versions of whitelists, blacklists, sanction watchlists, lists of Politically Exposed Persons and all the other data, aggregated by this data broker. This ensures Covery has the latest intel on all financial entities monitored by Dow Jones in the USA, Europe and worldwide.

Due to this, whenever a customer orders any transaction with your online account, Covery checks their credentials and banking details against Dow Jones’s databases, thus performing the CDD, KYC and automated AML checks in under 300 ms. A variety of other features like device fingerprinting, behavioral analysis, Trustchain global reputation records database, supervised Machine Learning for risk scoring, synthetic identity fraud protection,  and chargeback management tools like Ethoca or VMPI make Covery a useful anti-fraud solution.

Thus said, a combination of features ensures Covery customers have all their daily KYC/CDD needs covered. However, if the volume of the operation warrants EDD, an additional effort should be devoted to checking the background of the customer. While Covery cannot do this end-to-end, its insights can help form a better picture for informed decision-making.

Should you want to know how else Covery can provide value for your business — contact us, we are always ready to help!