Around $2tn of illicit cash flows each year through the global financial system despite the efforts of regulators and financial institutions. One way to fight illicit money is to use enhanced due diligence (EDD) and a comprehensive know your customer (KYC) process which focuses on transactions and customers that pose greater risk of fraud.

EDD is generally thought to be a higher grade of security than CDD and could involve more information requests, such as sources of wealth and funds, corporate appointments, and associations with other individuals or companies. It may also require more in-depth background checks, including media searches to discover any reputational or publically available evidence of criminal activities that could pose risks to the bank’s business.

The regulatory bodies have guidelines for when EDD should trigger. This is usually based on the nature of the transaction or customer, as well as whether the person concerned is politically exposed (PEP). It is up to each FI to decide if they want to add EDD to CDD.

It is essential to have policies that clearly communicate to employees what EDD expects and what it doesn’t. This will help avoid high-risk situations that lead to hefty https://warpseq.com/what-do-virtual-data-rooms-offer/ fraud fines. It is crucial to have an identity verification process in place that lets you identify red flags, such as hidden IP addresses, spoofing technology and fictitious identities.