Around $2 trillion of illicit cash flows every year through the global financial system, despite efforts by regulators and financial institutions. One way to tackle dirty money is through enhanced due diligence (EDD) and a comprehensive know your customer (KYC) process that digs into transactions that carry greater fraud risks.

EDD is generally considered to be more thorough of screening than basic CDD, and may involve more details requests, such as sources of wealth and funds, corporate appointments, and connections with other individuals or companies. It also often involves more extensive background checks, which may include media searches to discover any reputational or publically available evidence of misconduct or criminal activity that could pose risks to the bank’s business.

The regulatory bodies establish guidelines for when EDD should be triggered. This is usually contingent on the nature of the customer or transaction and also whether the person who is being questioned is a politically exposed individual (PEP). However, it is ultimately up to each FI to make a subjective decision about what triggers EDD in addition to CDD.

The most important thing is to develop effective policies that make clear to employees what EDD is and what it isn’t. This helps avoid high-risk situations that could lead to hefty fraud fines. It is important to have a verification process for your identity in place Board Software that allows you to detect red-flags such as hidden IP addresses, spoofing technology, and fictitious identifies.