Around $2tn of illicit cash flows every year through the global financial systems despite the efforts of regulators and financial institutions. One way to stop illicit money is to use enhanced due diligence (EDD) which is a thorough know your customer (KYC) process that examines transactions that carry greater fraud risks.
EDD is considered to be a higher screening level than CDD and can include more information requests, such as sources and corporate appointments, money, and affiliations with companies or individuals. It also often involves more in-depth background checks, including media searches, to identify any publically accessible or publically known evidence of misconduct or criminal activity that could create danger to the bank’s business.
Regulatory bodies set out guidelines for when EDD should be activated, and this is typically based 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 want to include EDD to CDD.
The key is to create effective policies that make clear to employees what EDD needs and what it isn’t. This can help to avoid high-risk situations that lead to hefty fraud fines. It is crucial to have a verification process for your identity in place that will allow you to identify red flags such as hidden IP Board Software Pricing addresses, spoofing technologies and fictitious identifications.
