reshaping the contours of due diligence with VDR innovations

Every year, more than $2tn worth of illicit cash flows are circulating through the global financial system, despite the efforts of financial institutions and regulators to stop money laundering and terrorist financing. One way to fight dirty money is with enhanced due diligence (EDD) which is a thorough know your customer (KYC) process which focuses on customers and transactions with greater risk of fraud.

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

The regulatory bodies have guidelines on when EDD should be triggered. This is usually contingent on the nature of the transaction or customer and also whether the individual in question is a politically exposed individual (PEP). It is up to each FI to decide if they want to add EDD to CDD.

It is crucial to establish policies that clearly state to employees what EDD expects and what it does not. This will help avoid high-risk situations that lead to hefty fraud fines. It’s also crucial to have a thorough identity verification procedure which allows you to identify red flags like hidden IP addresses, spoofing technologies and fictitious identities.