Automate Enhanced Due Diligence Checks with Sardine

Minimize Risk Exposure With Enhanced Due Diligence

Imagine you’re a Cuban national visiting family on a vacation from Cuba. When you get there, your bank account freezes because you’ve entered a country under US Sanctions. 

Then when you return, you often have to call your institution and go through full KYC to unlock your account.

The institution's situation isn’t much better. If they see an alert that a customer is out of the country, they often have to flag it manually for enhanced due diligence (EDD) and then drive a series of KYC workflows.

This scenario could be much better. We can automate adding a user to enhanced due diligenceand dramatically reduce the friction in performing step-up authentication or full KYC for the user. 

How? Here’s how. 👇

Refresher: What is Enhanced Due Diligence 

First, a quick fresher on EDD.

Enhanced Due Diligence (EDD) occurs when a financial institution or company needs to gather additional information or intelligence about a high-risk customer. It is used in high-risk scenarios where standard Customer Due Diligence (CDD) isn’t enough. 

Enhanced due diligence has become the primary line of defence for compliance officers when faced with high-risk clients, but it is often manual, slow, and causes significant friction for good customers. 

Enhanced due diligence uses a wider lens to identify potential financial crimes and sanctions violations when onboarding customers and third-parties. Regulatory bodies like the Financial Crimes Enforcement Network (FinCen) expect organisations to understand the nature and purpose of their customer relationships. To meet this expectation, Financial Institutions (FIs) must design and maintain an EDD policy that provides the compliance team with practical guidelines on how to manage these higher-risk scenarios, such as money laundering or terrorism financing. 

Defining an Enhanced Due Diligence Policy

Defining an enhanced due diligence policy typically involves setting risk thresholds, establishing escalation triggers, and determining which clients or transactions require more detailed scrutiny.  When higher-risk clients such as Politically Exposed Persons (PEPs) or cash intensive businesses are identified during routine CDD checks, they are escalated for EDD review.

However, many businesses still rely on manual processes for EDD, where a human operator sifts through databases, watchlists, and piles of documents to assess the risk profile of each relationship. 

These manual reviews clog up workflows, saturate compliance teams, and create delays. 

Worse, critical red flags can slip through the cracks or manual oversight, leaving institutions vulnerable. As business spikes, growing backlogs of EDD cases can impact onboarding efficiency and draw regulatory attention - just like at Danske Bank in 2017, when over EUR 200 billion in suspicious transactions slipped through manual checks, leading to a USD 2 billion fine, becoming the most severe case of money laundering in European banking history.

Today’s advanced technologies provide FIs with the tools to avert such scandals. Automating this initial step allows systems to autonomously identify, prioritise, and queue high-risk cases for enhanced due diligence, thus eliminating delays and the risk of missed red flags. 

Automating the next layer, like enhanced KYC procedures, could save time, reduce friction, and boost accuracy. 

These approaches are able to cross-check a client’s information against a wider range of data points, far beyond what a human could process. Advanced systems like Sardine’s latest compliance product update creates specific rules and conditions that trigger enhanced due diligence checks and prevent backlogs, all while reducing friction for customers and businesses, allowing FIs to work smarter, not harder.

Boost Fraud Detection, Compliance, Security and User Trust with Step-Up Authentication 

Modern compliance strategies can also incorporate step-up authentication and KYC automation to streamline enhanced due diligence processes even more. These systems leverage behavioral analytics to monitor device usage patterns and characteristics, providing a more efficient and risk-based approach to client assessment.

Step-up authentication activates additional layers of security when it truly matters. 

Imagine a Cuban American living in Miami, accessing their banking services -

• On their return trip from Cuba, this customer triggers compliance alerts due to U.S. sanctions. 
• Rather than immediately blocking access or causing unnecessary friction, Sardine assesses the situation in real-time and adds the user to an EDD queue.
• The system needs a quick biometric scan or ID check to unlock the user from this queue to confirm the individual's identity without disrupting their experience. 

If a user’s behaviour suddenly shifts - say, an unusual login from a risky device or location - these systems can trigger stronger authentication measures, ensuring the transaction isn't quicksand for potential fraud. 

One key feature is the ability to detect VPNs or proxies. These services are often used to sidestep sanctions checks and manage the inconvenience. Sardine identifies a device's True Location and TrueI P addresses, ensuring this cannot happen.

Sardine’s Smart KYC and KYB stops fraud and criminals at the gate and manage risk without overwhelming alert queues. 

Our KYC and KYB automation trigger Eenhanced due diligence reviews and, in turn, can trigger step-up verifications, including selfie liveness checks, adding layers of security without compromising efficiency.

Enhanced Due Diligence Automation

Manual enhanced due diligence can quickly overwhelm already stretched compliance teams. FIs should focus on nimble, results-driven approaches like enhanced due diligence automation, which reduce friction and tackle financial crime head-on. 

Enhanced due diligence automation, combined with simple, digital step-up KYC and KYB automates manual work and make the customer experience as frictionless as possible. Advanced user device screening helps identify when a VPN or proxy is masking a user's true location. 

Sardine offers a centralized platform that streamlines compliance processes. It consolidates customer identification, AML monitoring, case management, and reporting within a single interface. 

If this sounds like a better solution than manual work, get in touch with us.

We’re excited to show you what we’ve built.

Oh and by the way 👇

Our Customer Identification Program provides KYC and KYB checks while simultaneously ensuring thorough CDD and EDD protocols. Sardine also supports both real-time and batch transaction monitoring, with 500+ pre-built rules that quickly flag suspicious activities.

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