Around $2 trillion in illicit cash flows every year through the financial system worldwide despite efforts from regulators and financial institutions. One way to stop dirty money is through enhanced due diligence (EDD) that is a comprehensive know your customer (KYC) process that digs into transactions and customers that pose greater fraud risks.
EDD is generally considered to be more thorough of security than CDD and could involve more details requests, such as sources of funds and wealth corporate appointments, relationships with other individuals or companies. It typically involves more thorough background checks, including media searches, to determine if there is any publicly accessible evidence or reputational evidence of misconduct or criminal activity that could threaten the bank’s operations.
Regulatory bodies set out guidelines for when EDD should be triggered. This is usually contingent on the nature of the transaction or customer and whether the person who is being questioned is a politically exposed individual (PEP). It is the decision of each FI to decide if they want to include EDD to CDD.
It is crucial to establish policies that clearly inform employees what EDD expects and what it is not. This will help to avoid high-risk situations that could result in hefty fines for fraud. It is crucial to have a verification process for your identity in place that will allow you data rooms: setting the gold standard in corporate transparency to identify red flags like hidden IP addresses, spoofing technology and fictitious identifiers.
