Around $2 trillion in illicit cash flows every year through the global financial systems, despite efforts by regulators and financial institutions. To combat dirty money, enhanced due diligence (EDD) is a process that involves an extensive Know Your Customer (KYC) which is a deep dive into customers as well as transactions that carry higher risk of fraud.
EDD is regarded as having a higher screening level than CDD and may include more information requests such as sources and corporate appointments, funds and connections with companies or individuals. It usually involves more thorough background checks, like media searches, in order to determine if there is any publicly accessible evidence or evidence of reputational proof of criminal conduct or misdeeds that could jeopardize the bank’s operations.
The regulatory bodies have guidelines on when EDD should be activated. This is usually based on the kind of transaction or customer and also whether the individual in question is a politically exposed individual (PEP). It is the decision of each FI to decide whether they wish https://warpseq.com/virtual-data-room-pricing-what-you-need-to-know/ to add EDD to CDD.
It is important to establish policies that clearly explain to employees what EDD expects and what it is not. This helps avoid high-risk situations that can lead to huge fines for fraud. It is essential to have a process for identity verification in place that can identify red flags like hidden IP addresses, spoofing techniques and fictitious identities.
