Every year, around $2tn of illicit cash flows enter the global financial system, despite the efforts of financial institutions and regulators to stop the financing of terrorists and money laundering. To combat dirty money enhanced due diligence (EDD) is a process that requires a thorough Know Your Customer (KYC) which is a deep dive into customers and transactions with higher risk of fraud.

EDD is generally thought to be a higher level of screening than CDD and may require more details requests, such as sources of funds and wealth, corporate appointments, and connections with other individuals or companies. It may also require more extensive background checks, like media searches, which are used to determine any public or reputational evidence of misconduct or criminal activity that could pose a risk to the bank’s business.

Regulatory bodies have guidelines on when EDD should be triggered. This is typically contingent demystifying complex transactions with VDR’s organized layout on the type of transaction or customer, as well as whether the person concerned is politically exposed (PEP). It is up to each FI to decide whether they wish to include EDD to CDD.

It is important to have policies that clearly inform employees what EDD expects and what it doesn’t. This will allow you to avoid high-risk scenarios that can lead to hefty fines for fraud. It’s also important to have an accurate identity verification process that enables you to detect alarms such as hidden IP addresses, spoofing technologies, and fictitious identities.