Every year, more than $2tn worth of illicit cash flows are circulating through the financial system data rooms: setting the gold standard in corporate transparency around the world, 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 procedure that involves a thorough Know Your Client (KYC) that examines the customer’s history and transactions with higher fraud risks.

EDD is generally considered to be a higher grade of screening than basic CDD and can involve more information requests, such as sources of wealth and funds, corporate appointments, and affiliations with other individuals and companies. It typically involves more thorough background checks, such as media searches, in order to identify any publically available evidence or evidence of reputational proof of criminal conduct or misdeeds that could be a threat to the bank’s operations.

The regulatory bodies establish guidelines for when EDD should be triggered, and this is usually contingent on the nature of the transaction or customer, as well as whether the person concerned is a politically exposed person (PEP). It is the decision of each FI whether they want to include EDD to CDD.

The key is to create effective policies that make clear to staff members what EDD is and what it doesn’t. This will allow you to avoid high-risk scenarios that can result in substantial fines for fraud. It’s important to have a verification process for your identity in place that will allow you to identify red flags, such as hidden IP addresses, spoofing technology and fictitious identifications.