This guide assists Dealers with the Carwow Wallet onboarding process when Enhanced Due Diligence (EDD) is needed by our banking partner, Airwallex. EDD is a one-time requirement for onboarding high-risk businesses, like FCA-registered Credit Brokers.

We’ve compiled a list of the documentation that may be required for EDD; however, the specific documents may vary by situation or may not even be needed.

One of the following supporting documents is required to verify the business operations:

One of the following documents is required to ascertain the Dealership’s source of funds:

In addition to the standard business operation documents, four key policies and procedures may be requested. To aid dealerships in gathering the required policies, we've broken down the industry-standard requirements for each policy. The descriptions below serve merely as a reference for those without existing written policies.

A Customer Due Diligence (CDD) policy is crucial for organizations to assess and manage customer-related risks effectively. It ensures compliance with legal requirements and acts as a strong defence against financial crimes like money laundering and fraud.

A robust CDD policy protects the organization's interests and maintains operational integrity, incorporating key elements such as a comprehensive customer risk assessment.

Low Risk: Customers who present minimal risk, such as individuals with clear and verifiable identities and a history of compliance.

Medium Risk: Customers who may have more complex business structures or operate in higher-risk sectors but still pose a manageable level of risk.

High Risk: Customers from high-risk countries, industries, or with suspicious transactional histories. These customers may require enhanced due diligence (EDD).

The policy for medium and high-risk customers should include risk-mitigating strategies. For example, if the company does not engage with politically exposed persons (PePs), this should be stated. If PePs are accepted, the policy must outline measures to mitigate associated risks. Additionally, it should describe how customer CDD is performed. Below is an example of a standard CDD procedure:

For Individual Customers: How does the company collect personal details such as full name, date of birth, nationality, address, and government-issued identification numbers (e.g., passport, driver’s license)?

For Business Customers: How does the company collect company details such as name, legal structure, business registration number, address, beneficial owners, and directors?

Record-keeping is vital for a Customer Due Diligence (CDD) policy to demonstrate compliance with legal requirements, facilitate audits, and respond to regulatory inquiries. This policy can be part of an Enhanced Due Diligence (EDD) policy or a separate document. It should specify the retention period for customer records, which in the UK, generally is a minimum of six years from the end of the business relationship or the last transaction.

Records to be retained can include:

A politically exposed person (PeP) is someone who holds or has held a prominent public position, like a government official or parliament member, along with their immediate family and close associates. A PeP Policy outlines enhanced due diligence measures to mitigate risks associated with PeP customers.

A few key EDD measures can include:

Gathering More Information: How the business collects further details about the sources of PeP customer wealth, business interests, and the purpose of the business relationship.

Understanding the Nature of the Relationship: This involves assessing how the business evaluates customer connections and the risks associated with them. What measures are in place to understand the financial activities of Politically Exposed Persons (PEPs)?

Approval Procedures: Businesses typically use an approval system to decide on relationships with PeP customers, ensuring that qualified personnel, like a Senior Manager or the Compliance department, review the decisions.

Ongoing Monitoring: Measures for monitoring transactional activity include enhanced scrutiny of PEP customers and their associates throughout the business relationship. Transactions should be closely examined for unusual or suspicious activity.

Source of Wealth: What measures investigate how a PeP customer acquired their wealth, such as through business, inheritance, or investments? This is crucial for individuals in government positions to mitigate the risk of illicit enrichment.

Source of Funds: How does the business verify the legitimacy of funds for transactions? What measures ensure funds are not from corrupt or illegal sources?

Documentation and Reporting: How does the business keep thorough records of due diligence on PeP customers? The policy should also detail the process for reporting suspicious activity to the FCA.

Suspicious financial activity refers to actions or patterns suggesting illegal activities like money laundering, fraud, or terrorism financing. Financial institutions must report these activities to the FCA, and a Suspicious Transactions Reporting Policy/Procedure should detail the internal escalation and FCA reporting processes.

A few key processes to include can be:

Reporting Procedures: How does the business ensure employees receive adequate training to report suspicious financial activity promptly? The procedure should specify internal reporting channels, identify those responsible for investigating reports, outline how to assess potential risk and provide guidelines for submitting a Suspicious Activity Report (SAR) to the Financial Conduct Authority (FCA).

Record-Keeping: Who is responsible for maintaining all reports and decisions for a minimum of six years in compliance with regulatory requirements in the UK? What processes does the business have in place to ensure proper record-keeping?

Suspension of Transactions / Activities: What type of measures or procedures can be taken to suspend transactions or business operations with parties identified as engaging in suspicious activities during the investigation process?

If you’re experiencing difficulties or need assistance with your EDD process please contact our support team. We’re here to help!