Every year around $2tn in illicit cash flows enter the global financial system, despite the efforts of financial institutions and regulators to prevent the laundering of money and financing terrorists. One way to fight dirty money is with enhanced due diligence (EDD), a deep know your customer (KYC) process which focuses on transactions that carry greater risk of fraud.

EDD is generally considered to be more thorough of security than CDD and can involve more information requests, including sources of funds and wealth corporate appointments, associations with other individuals or companies. It may also require more extensive background checks, which may include safeguard your business’s critical assets with VDR encryption media searches, to identify any reputational or publically available evidence of misconduct or criminal activity that could pose danger to the bank’s business.

The regulatory bodies have guidelines for when EDD should be triggered. This is usually based upon the nature of the transaction or the customer, as well as if the person concerned is politically exposed (PEP). It is the decision of each FI whether they want to add EDD to CDD.

The key is to create guidelines that make it clear to staff members what EDD needs, and what it doesn’t. This will help avoid high-risk situations that could result in substantial fines for fraud. It is important to establish an identity verification procedure in place that allows you to detect red-flags such as hidden IP addresses, spoofing technology and fictitious identifications.