Fighting Dirty Money With Enhanced Due Diligence

Every year around $2tn in illicit cash flows enter the global financial system, despite the efforts of regulators and financial institutions to stop the laundering of money and financing https://warpseq.com/ terrorists. One way to tackle dirty money is with enhanced due diligence (EDD), a deep know your customer (KYC) process that examines transactions that have higher fraud risks.

EDD is considered to be a higher screening level than CDD and may include more information requests, including sources and corporate appointments, funds, and associations with companies or individuals. It is also more likely to require extensive background checks, which may include media searches to discover any reputational or publically available evidence of criminal activity that could be danger to the bank’s business.

The regulatory bodies have guidelines for when EDD should be activated, and this is typically based on the nature of the transaction or customer, as well as whether the person who is being questioned is a politically exposed individual (PEP). It is the decision of each FI whether they want to include EDD to CDD.

It is crucial to establish policies that clearly inform employees what EDD expects and what it will not. This can help to avoid situations that are high-risk and can lead to significant fraud fines. It is essential to have an identity verification process in place that will allow you to identify red flags such as hidden IP addresses, spoofing technologies and fictitious identifiers.