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 money laundering and terrorist financing. To stop dirty money, enhanced due diligence (EDD) is a method that involves an extensive Know Your Customer (KYC) which is a deep dive into customers as well as transactions that carry higher fraud risks.

EDD is regarded as a more thorough screening level than CDD and can contain more information requests, including sources and corporate appointments, funds and relationships with individuals or companies. It may also require more thorough background checks, such as media searches, in order to find any publically available or reputational evidence of criminal activities that could pose danger to the bank’s business.

The regulatory bodies have guidelines for when EDD should be triggered. This is typically contingent on the kind of transaction or customer, as well as whether the individual in question is politically exposed (PEP). It is the decision of each FI to decide whether they wish to add EDD to CDD.

It is important to have policies that clearly state to employees what EDD expects and what it is not. This will allow you to avoid high-risk situations that could result in substantial fines for fraud. It’s also vital to have a thorough identity verification process which allows you to identify suspicious IP addresses, spoofing technology and fictitious identities.

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