Fighting Dirty Money With Enhanced Due Diligence

Every year, around $2tn of illicit cash flows are circulating through the global financial system, despite the efforts of regulators and financial institutions to prevent the financing of terrorists and money laundering. To combat dirty money enhanced due diligence (EDD) is a process that involves an extensive Know Your Customer (KYC) which investigates customers in depth and transactions that have higher risk of fraud.

EDD is considered a higher screening level than CDD and can include more information requests such as sources and funds, corporate appointments and relationships with companies or individuals. It is often accompanied by more thorough background checks, like media searches, in order to discover any publicly available evidence or evidence of reputational proof of criminal activity or misconduct that could be a threat to the bank’s operations.

The regulatory bodies have rules on when EDD should trigger. This is typically contingent on the kind of transaction or customer, as well whether the individual in question is politically exposed (PEP). It is the decision of each FI to decide if they want to add EDD to CDD.

It is essential to have policies that clearly state to employees what EDD expects and what it will not. This will allow you to avoid high-risk situations that could result in hefty fines for fraud. It’s also vital to have an accurate identity verification process that can help you spot alarms such as hidden IP addresses, spoofing technology and fictitious identities.

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