Every year, more than $2tn worth of illicit cash flows into the global financial system despite the efforts of financial institutions and regulators to prevent money laundering and terrorist financing. To combat dirty money enhanced due diligence (EDD) is a process that requires a thorough Know Your Client (KYC) that is a deep dive into customers and transactions with greater fraud risks.
EDD is regarded as having a higher screening level than CDD and may include more information requests, including sources and corporate appointments, money, and relationships with individuals or companies. It also often involves more thorough background checks, such as media searches to discover any public or reputational evidence of misconduct or criminal activities that could pose a risk to the bank’s business.
The regulatory bodies have guidelines for when EDD should be triggered. This is usually based upon the kind of transaction or customer, as well whether the person involved is politically exposed (PEP). However, it is ultimately the responsibility of each FI to make a personal judgment call about what triggers EDD in addition to CDD.
The most important thing is to establish effective policies that make clear to employees what EDD is and what it doesn’t. This will help to avoid situations that are high-risk and could lead to hefty fines for fraud. It’s also crucial to have an accurate identity verification process that can help you spot alarms such as https://warpseq.com/best-data-rooms-online-secure-and-reliable/ hidden IP addresses, spoofing technology and fake identities.