Fighting Dirty Money With Enhanced Due Diligence

Around $2tn of illicit cash flows each year through the global financial system despite efforts by regulators and financial institutions. To combat dirty money, enhanced due diligence (EDD) is a process that requires a thorough Know Your Client (KYC), which is a deep dive into customers and transactions with higher risk of fraud.

EDD is generally thought to be a higher degree of screening than basic CDD and could involve more information requests, including sources of wealth and funds, corporate appointments, and relationships with other individuals or companies. It usually involves more thorough background checks, such as media searches, in order top secure and reliable online storages to find any publicly available evidence or evidence of reputational proof of criminality or other misconduct that could threaten the bank’s operations.

The regulatory bodies have guidelines for when EDD should be triggered. This is typically based on the nature of the customer or transaction, as well as whether the person who is being questioned is a politically exposed person (PEP). It is up to each FI to decide if they want to add EDD to CDD.

It is important to establish policies that clearly inform employees what EDD expects and what it will not. This helps avoid situations that are high-risk and can lead to significant fraud fines. It’s also crucial to have a thorough identity verification procedure which allows you to identify suspicious IP addresses, spoofing technology and fake identities.