Around $2tn of illicit cash flows every year through the financial system worldwide despite efforts by regulators and financial institutions. To combat dirty money, enhanced due diligence (EDD) is a method that involves a thorough Know Your Customer (KYC), which is a deep dive into customers and transactions with higher risk of fraud.

EDD is regarded as a more thorough screening level than CDD and can include more information requests, including sources and funds, corporate appointments and connections with companies or individuals. It often involves more thorough background checks, including media searches, in order to identify any publically available evidence or reputational evidence of criminal activity or misconduct that could threaten the bank’s operations.

The regulatory bodies have guidelines for when EDD should trigger. This is usually based on the type of transaction or customer, as well as if the person in question is politically exposed (PEP). It is up to each FI to decide if they want to add EDD to CDD.

The most important thing is to establish effective policies that make clear to staff what EDD is and what it isn’t. This helps avoid high-risk situations that lead to substantial fraud fines. It is crucial to have a process for identity verification in place that can identify red flags such as hidden IP addresses, spoofing tools, and fictitious identifies.

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