Many acronyms related to Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance represent processes for collecting member information. One of those acronyms—EDD, or enhanced due diligence—provides additional scrutiny.
Warren Barnett, vice president of risk management at Hudson Heritage Federal Credit Union in Middletown, N.Y., discussed EDD at the CUNA BSA/AML Certification Conference with NASCUS this week in Tempe, Ariz.
EDD, along with customer due diligence (CDD), is a cornerstone of customer risk management, says Barnett. CDD is the process of performing background checks on potential members and usually occurs during member onboarding.
EDD creates a more comprehensive understanding of the risks associated with potential members.
“EDD is becoming more important as members do more business through multiple channels, especially digital channels,” Barnett says.
He says regulators, governments, and agencies use EDD programs to slow funds for criminals, terrorists, and tax cheats.
He noted that EDD should be applied in any situation where there is a higher risk of money laundering or terrorist financing.
It should also happen in certain prescribed situations, including:
Among the high-risk relationships Barnett cited:
Barnett suggested gathering the following information to better understand the nature and purpose of these types of relationships:
Barnett says EDD entails more time and resource capacity. “It’s important to consider your credit union’s business model and your risk appetite,” he says.