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 money laundering and financing of terrorists. To combat dirty money enhanced due diligence (EDD) is a procedure that involves an extensive Know Your Customer (KYC) which examines the customer’s history and transactions with greater fraud risks.

EDD a paradigm shift in data security: the rise of VDRs is considered to be a higher screening level than CDD and can include more information requests like sources and corporate appointments, money, and associations with individuals or companies. It typically involves more thorough background checks, including media searches, in order to discover any publicly available evidence or evidence of reputational proof of misconduct or criminal activity that could be a threat to the bank’s operations.

The regulatory bodies have guidelines on when EDD should be triggered. This is typically contingent upon the nature of the transaction or the customer, and also whether the person involved is politically exposed (PEP). However, it is the responsibility of each FI to make a subjective judgment on what triggers EDD on top of CDD.

The most important thing is to establish good policies that make it clear to staff members what EDD needs and what it does not. This can help to avoid high-risk situations that could lead to huge fines for fraud. It is essential to have a verification process for your identity in place that allows you to detect red-flags such as hidden IP addresses, spoofing technologies and fictitious identities.