Every year, more than $2tn worth of illicit cash flows into the financial system around the world, despite the efforts of financial institutions and regulators to stop the financing of terrorists and money laundering. One way to tackle dirty money is with enhanced due diligence (EDD), a deep know your customer (KYC) process which focuses on transactions that have higher fraud risks.
EDD is regarded as having a higher screening level than CDD and can contain more information requests such as sources and corporate appointments, funds and relationships with companies or individuals. It usually involves more thorough background checks, like media searches, to identify any publically available evidence or evidence of reputational proof of criminal activity or misconduct that could pose a threat to the bank’s operations.
The regulatory bodies provide guidelines on when EDD should be activated, and this is usually dependent on the kind of transaction or customer and whether the person who is being questioned is a politically exposed person (PEP). It is the decision of each FI whether they would like to include EDD to CDD.
It is essential to have policies that clearly explain to employees what EDD expects and what it does not. This helps to avoid situations that are high-risk and can lead to hefty understanding digital room fees fraud fines. It is important to have an identity verification process in place that will allow you to identify red flags, such as hidden IP addresses, spoofing tools and fictitious identifications.