Fighting Dirty Money With Enhanced Due Diligence

Around $2 trillion of illicit cash flows per year through the global financial systems, despite efforts by financial institutions and regulators. One method to combat dirty money is with enhanced due diligence (EDD) and a comprehensive know your customer (KYC) process that examines transactions that have higher risk of fraud.

EDD is considered a higher screening level than CDD and may include more information requests such as sources and corporate appointments, money, and connections with companies or individuals. It often involves more thorough background checks, like media searches, in order to determine if there is any publicly accessible evidence or reputational evidence of misconduct or criminal activity that could be a threat to the bank’s operations.

The regulatory bodies establish guidelines on when EDD should be triggered. This is usually contingent on the nature of the customer or transaction 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 add EDD to CDD.

It is essential to have policies that clearly communicate to employees what EDD expects and what it is not. This will allow you to avoid high-risk scenarios that can result https://warpseq.com/5-trends-of-virtual-data-room-solutions/ in hefty fines for fraud. It’s also vital to have a thorough identity verification process that can help you spot red flags like hidden IP addresses, spoofing technologies and fictitious identities.