Quick Answer: How Do You Carry Out Enhanced Due Diligence?

What are the 3 types of risk in principles of lending?

What is Credit Risk.

3 Types of Risks and How to Manage Them Credit Default Risk.

Concentration Risk.

Country Risk..

How do you conduct customer due diligence?

Anti-money laundering – a guide to customer due diligenceWhat is customer due diligence?Submitting a suspicious activity report (SAR)The risk based approach to anti-money laundering.Be aware of hidden beneficial owners.Keep central registers of beneficial owners.Request the correct supporting documents.More items…•

What is a good credit risk?

Definition of good credit risk : someone who is likely to pay back a loan.

What are the 3 components of KYC?

To create and run an effective KYC program requires the following elements: Customer Identification Program (CIP) How do you know someone is who they say they are? … Customer Due Diligence. … Ongoing Monitoring.

What is due care and due diligence?

Due care is a way to implement something right away in order to perform mitigation procedures. Due diligence is making sure the right thing was done correctly, and if it is necessary to do it again or if further research is required. Due care is doing the right thing, the prudent man rule.

What is ongoing customer due diligence?

Customer Due Diligence (CDD) information comprises the facts about a customer that should enable an organisation to assess the extent to which the customer exposes it to a range of risks. These risks include money laundering and terrorist financing.

Which of the following are subject to enhanced due diligence?

Enhanced Due Diligence factorsLocation of the business.Occupation or nature of business.Purpose of the business transactions.Expected pattern of activity in terms of transaction types, dollar volume and frequency.Expected origination of payments and method of payment.More items…•

What is enhanced due diligence checklist?

Enhanced Due Diligence (“EDD”) is additional information collected for higher-risk customers to provide a deeper understanding of customer activity to mitigate associated risks. Customer risk assessments can be used to determine which level of due diligence to apply.

What is the difference between KYC and CDD?

For regulated entities, the KYC checks that sufficed in the past have now developed into CDD programmes, and the main difference between KYC and CDD, apart from the emphasis on the source of funds, is that the CDD checks continue throughout the client relationship.

What is meant by value at risk?

Value at risk (VaR) is a statistic that measures and quantifies the level of financial risk within a firm, portfolio or position over a specific time frame. … Risk managers use VaR to measure and control the level of risk exposure.

What is the difference between CDD and EDD?

CDD aims at collecting data about customers’ identity and contact information as well as measuring their risk. EDD is used for high-risk customers, aka those who are more likely to implement related to money laundering and terrorism financing activities due to the nature of their business or transactions.

What is enhanced due diligence UK?

The enhanced due diligence measures when you deal with a politically exposed person are: making sure that only senior management gives approval for a new business relationship. taking adequate measures to establish where the person’s wealth and the funds involved in the business relationship come from.

What is the KYC process?

KYC means Know Your Customer and sometimes Know Your Client. KYC or KYC check is the mandatory process of identifying and verifying the identity of the client when opening an account and periodically over time. In other words, banks must make sure that their clients are genuinely who they claim to be.

Is KYC mandatory?

You can not open any of the accounts without the Know Your Customer Documents. In fact, it is now mandatory as per guidelines from the Securities and Exchange Board of India to comply with these KYC norms before you open a demat and trading account. Banks too will not open an account unless you have the same.

What is standard due diligence?

Standard due diligence requires you to identify your customer as well as verify their identity. … This due diligence should provide you with confidence that that you know who your customer is and that your service or product is not being used as a tool to launder money or any other criminal activity.

Who is a high risk customer?

Higher Risk Customers are those who are engaged in certain professions or avail the banking products and services where money laundering possibilities are high. Financial Institutions conduct enhanced due diligence (EDD) and ongoing monitoring for the higher risk customers.

What type of risks are managed in credit risk analyzer?

Country risks arise when either the country of the business partner or the country of the transaction currency becomes insolvent. Counterparty/issuer risks are subdivided into credit risk and settlement risk. The existence of both these risks depends on the timing of the analysis of the transactions.

What are the 3 stages of money laundering?

There are three stages of money laundering, each with a unique purpose. The first stage is placement, second is layering and third is integration.

What is enhanced due diligence in banking?

Enhanced due diligence (EDD) is a KYC process that provides a greater level of scrutiny of potential business partnerships and highlights risk that cannot be detected by customer due diligence. EDD goes beyond CDD and looks to establish a higher level of identity assurance by obtaining the customer’s identity and …

What are the 3 main factors to consider in determining AML risk?

Inherent BSA/AML risk falls into three main categories: (1) products and services, (2) customers and entities, and (3) geographic location.