Around $2tn of illicit cash flows per year through the global financial systems despite the efforts of regulators and financial institutions. To combat dirty money, enhanced due diligence (EDD) is a process that requires a thorough Know Your Customer (KYC) that examines the customer’s history and transactions understanding digital room fees that have higher risk of fraud.
EDD is regarded as a more thorough screening level than CDD and can contain more information requests like sources and funds, corporate appointments and connections with companies or individuals. It can also involve more extensive background checks, which may include media searches, to identify any publically available or reputational evidence of criminal activity that could create danger to the bank’s business.
The regulatory bodies have guidelines for when EDD should trigger. It is typically based on the nature of the transaction or customer, as well as if the person concerned is politically exposed (PEP). It is up to each FI whether they want to add EDD to CDD.
It is important to have policies that clearly communicate to employees what EDD expects and what it does not. This will help to avoid situations that are high-risk and could cause hefty fines due to fraud. It’s also crucial to have a thorough identity verification procedure that allows you to spot warning signs such as hidden IP addresses, spoofing technologies, and fictitious identities.
