Each year, about $2tn in illicit cash flows are circulating through the financial system around the world, despite the efforts of financial institutions and regulators to prevent the laundering of money and financing terrorists. One way to fight illicit money is to use enhanced due diligence (EDD) that is a comprehensive know your customer (KYC) process that examines customers and transactions with greater risk of fraud.
EDD is regarded as having a higher screening level than CDD and may include more information requests, including sources and corporate appointments, funds and affiliations with companies or individuals. It often involves more thorough background checks, including media searches, to find any publicly available evidence or reputational evidence of criminality or other misconduct that could be a threat to the bank’s operations.
The regulatory bodies have guidelines on when EDD should be triggered. This is usually contingent on the kind of transaction or customer and whether the person https://warpseq.com/ in question is a politically exposed person (PEP). However, it’s ultimately up to each FI to make a purely subjective judgment on what triggers EDD in addition to CDD.
It is important to establish policies that clearly explain to employees what EDD expects and what it will not. This can help to avoid high-risk situations that could lead to hefty fraud fines. It’s important to have a verification process for your identity in place that will allow you to detect red-flags such as hidden IP addresses, spoofing technology, and fictitious identifies.