What is enhanced due diligence?
Enhanced Due Diligence (EDD) refers to the additional checks and information-gathering measures that regulated businesses must apply when dealing with higher-risk customers, transactions, or business relationships. EDD goes beyond standard CDD in both depth and scope.
When is EDD required?
Enhanced due diligence applies wherever the risk is higher. Some situations require it by law; others are left to your risk assessment.
Politically exposed persons
PEPs and their family members and close associates automatically trigger EDD requirements under the FATF Recommendations.
High-risk jurisdictions
Customers or transactions connected to FATF grey or black-listed jurisdictions require enhanced measures.
Complex or unusual transactions
Transactions that are unusually complex, have no apparent economic purpose, or deviate from the expected pattern for the business relationship should trigger EDD.
Other high-risk factors
Complex ownership structures, bearer shares, nominee arrangements, and high-value cash transactions are all factors that may warrant EDD.
EDD measures in practice
In practice, enhanced due diligence is usually some combination of the following.
- Source of wealth and funds: Obtaining and verifying information about how the customer acquired their wealth and the specific funds for the transaction
- Senior management approval: Requiring sign-off from a senior manager or the MLRO before establishing or continuing the business relationship
- Enhanced monitoring: Increasing the frequency and depth of ongoing monitoring and sanctions rescreening
- Additional documentation: Collecting corroborating documents and independent verification of information provided by the customer
FirmScreen's screening platform supports EDD workflows by enabling configurable screening thresholds for higher-risk customers and maintaining detailed audit trails of all enhanced checks performed.
Related terms
- CDD - the standard level of due diligence
- PEP - a key trigger for EDD requirements
- Beneficial Owner - identification may require enhanced measures
- SAR - may need to be filed if EDD reveals concerns