Enhanced due diligence (EDD)
We design enhanced due diligence (EDD) measures, documentation and risk management
Explained – what does enhanced due diligence (EDD) mean?
Enhanced due diligence, often abbreviated to EDD, requires an organisation to go beyond basic customer due diligence (CDD). This may involve obtaining more detailed information about the customer’s identity, business activities and transactional patterns. An AML consultant can help design procedures and controls to conduct enhanced due diligence in a structured way. The legal basis for these measures is set out in the Swedish Anti-Money Laundering Act and is particularly relevant for high-risk customers.
When does the question of enhanced due diligence arise?
EDD becomes relevant where a customer or business relationship is classified as high risk. Examples include customers from jurisdictions with weak AML controls, politically exposed persons (PEPs and their relatives and close associates), or transactions involving unusually complex arrangements. In such cases, firms must perform EDD checks to ensure the relationship is not used for unlawful purposes.
Key considerations when you conduct enhanced due diligence
When organisations perform enhanced due diligence (EDD), several elements need careful handling:
- Gather expanded information on the customer’s identity, business and ownership structure, including beneficial owner identification and UBO verification.
- Map the customer’s financial background and origin of funds.
- Assess the purpose of the business relationship in greater detail.
- Apply heightened monitoring of transactions and behavioural patterns, including targeted EDD checks.
- Document each step of the review to enable follow-up and audit.
- Ensure management takes decisions on relationships classified as high risk.
EDD therefore entails a higher degree of control and a deeper analysis to understand the customer and transactions in the round. Specialist EDD services can support robust risk assessment and timely escalation.
Enhanced due diligence (EDD)
Why is enhanced due diligence (EDD) important?
Enhanced due diligence is central to combating money laundering and terrorist financing because high-risk customers and complex transactions might otherwise go undetected. By deepening the review, organisations ensure they have sufficient knowledge to assess the money-laundering risk linked to the relationship and to report suspicious activities where appropriate.
EDD creates better conditions for identifying suspicious activities and transactions, enabling early action in line with AML requirements. This strengthens both compliance and internal risk management.
An organisation that takes enhanced due diligence seriously demonstrates that it prioritises compliance. This builds credibility with authorities, customers and partners. An AML consultant can help embed CDD checks and EDD services across onboarding and ongoing monitoring.
Frequently asked questions about 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.
Read more about our services
AML legal counsel
Engage our AML legal counsel when your anti-money laundering framework needs to be business-led, robust and practically implementable. We support governance, customer due diligence and risk classification as well as reporting and monitoring processes, enabling the business to operate consistently and stand up to scrutiny.
General risk assessment
Morling Consulting produces your general risk assessment to establish a clear risk profile and translate it into internal procedures. With our support you receive a risk assessment, a method for risk classification and updated internal procedures, with a particular focus on financial services and accountancy and bookkeeping firms.
Customer due diligence
Bring in support for customer due diligence/KYC when processes and documentation must be consistent and robust, for example in financial services and bookkeeping operations. We strengthen onboarding and ongoing monitoring, templates and control points, with a focus on practical requirements for identification, risk classification and traceable documentation.
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