Enhanced due diligence (EDD)

EDD is a more in-depth review of the customer’s identity, activities and transactions to manage high-risk customers and to conduct enhanced due diligence effectively.

EDD is required for business relationships or transactions that present high risk, for example for politically exposed persons (PEPs) or customers from high-risk countries. In such cases, EDD for high-risk customers complements baseline CDD.

CDD covers basic customer due diligence applicable to all customers. EDD is used where risk is higher and involves a more extensive and detailed review – the practical difference between CDD and EDD is the depth of verification and ongoing monitoring (CDD vs EDD).

During enhanced due diligence, the following may be required:

• Details of ownership structure and ultimate beneficial owners, including beneficial owner identification and UBO verification
• Information on the origin of funds
• Explanations for unusual or complex transactions
• Supplementary identity documentation

EDD makes it possible to understand and control customers that pose high risk. It helps firms detect and report suspicious activities in time and ensures the framework is followed, alongside proportionate CDD checks.

Senior management has ultimate responsibility for ensuring EDD is performed. Day-to-day work is often undertaken by customer-facing teams, while acceptance decisions for high-risk customers should be taken at a higher level. Where needed, external EDD services and an experienced AML consultant can be engaged.

Related terms: customer due diligence; kyc enhanced due diligence; pep risk assessment; edd services; cdd checks.