Fighting Dirty Money With Enhanced Due Diligence

Each year, about $2tn in illicit cash flows are circulating through the global financial system despite the efforts of regulators and financial institutions to prevent money laundering and financing of terrorists. One way to fight the dirty money is to implement enhanced due diligence (EDD) and a comprehensive know your customer (KYC) process that focuses on customers and transactions with greater risk of fraud.

EDD is generally considered to be a higher degree of screening than basic CDD, and may involve more information requests, such as sources of funds and wealth, corporate appointments, and associations with trends of virtual data room solutions other individuals or companies. It often involves more thorough background checks, including media searches, to discover any publicly available evidence or reputational evidence of misconduct or criminal activity that could jeopardize the bank’s operations.

The regulatory bodies provide guidelines on when EDD should be triggered. This is usually based on the nature of the customer or transaction and whether the person concerned is a politically exposed individual (PEP). But ultimately, it’s up to each FI to make a subjective decision about what triggers EDD in addition to CDD.

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