Fighting Dirty Money With Enhanced Due Diligence

Each year, about $2tn in illicit cash flows into the financial system around the world, despite the efforts of financial institutions and regulators to stop the laundering of money and financing terrorists. To combat dirty money enhanced due diligence (EDD) is a procedure that requires a thorough Know Your Customer (KYC) that digs deep into customers and transactions that have higher risk of fraud.

EDD is generally considered to be a higher level of screening than basic CDD, and may involve more information requests, like sources of funds and wealth, corporate appointments, and connections with other individuals or companies. It is often accompanied by more thorough background checks, such as media searches, in order to find any publicly available evidence or evidence of reputational proof of criminal conduct or misdeeds that could threaten the bank’s operations.

The regulatory bodies have guidelines for when EDD should be activated, and this is usually contingent on the kind of transaction or customer, as well as whether the person in question is a politically exposed individual (PEP). However, it is ultimately up to each FI to make a subjective judgment call about what triggers EDD in integrating VDRs in your business for a competitive edge addition to CDD.

It is crucial to establish policies that clearly explain to employees what EDD expects and what it is not. This will help avoid high-risk situations that could lead to huge fines for fraud. It’s also important to have a thorough identity verification procedure that enables you to detect suspicious IP addresses, spoofing technology and fake identities.