Around $2 trillion of illicit cash flows annually through the global financial systems, despite efforts by regulators and financial institutions. One way to stop dirty money is through enhanced due diligence (EDD), a deep know your customer (KYC) process that focuses on customers and transactions with greater risk of fraud.

EDD is considered to be a higher screening level than CDD and can contain more information requests like sources and corporate appointments, funds, and affiliations with individuals or companies. It may also require more in-depth background checks, including media searches, to identify https://warpseq.com/why-the-best-data-room-services-can-not-help-your-business/ any reputational or publically available evidence of criminal activity that could create risks to the bank’s business.

The regulatory bodies establish guidelines on when EDD should be activated, and this is typically based on the type of customer or transaction and whether the person concerned is a politically exposed person (PEP). It is the decision of each FI whether they would like to include EDD to CDD.

The key is to formulate solid policies that make it clear to staff members what EDD needs and what it does not. This helps avoid situations that are high-risk and can lead to substantial fraud fines. It is essential to establish an identity verification procedure in place that lets you identify red flags such as hidden IP addresses, spoofing technology and fictitious identifications.