Fighting Dirty Money With Enhanced Due Diligence

Around $2tn of illicit cash flows every year through the global financial system despite efforts from regulators and financial institutions. To combat dirty money, enhanced due diligence (EDD) is a method that requires a thorough Know Your Customer (KYC) that digs deep into customers and transactions with higher fraud risks.

EDD is regarded as a more thorough screening level than CDD and can contain more information requests like sources and corporate appointments, money, and affiliations with companies or individuals. It usually involves more thorough background checks, like media searches, in order to identify any publically available evidence or evidence of reputational proof of criminal activity or misconduct that could jeopardize the bank’s operations.

The regulatory bodies have rules on when EDD should trigger. It is typically based on the nature of the transaction or customer, and also whether the person concerned is politically exposed (PEP). However, it’s ultimately the responsibility of each FI to make a personal judgment call about https://warpseq.com/what-do-virtual-data-rooms-offer/ what triggers EDD on top of CDD.

The key is to create good policies that make it clear to employees what EDD is and what it isn’t. This will help to avoid high-risk scenarios that can result in substantial fines for fraud. It is also essential to have a thorough process for identity verification that enables you to detect red flags like hidden IP addresses, spoofing technology, and fictitious identities.