What Is Enhanced Due Diligence?

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When a customer or business has a higher risk of money laundering, terrorist financing, or other financial crimes, they must be subject to an additional level of due diligence. Also known as enhanced due diligence (EDD), this goes beyond the normal KYC and AML checks by gathering data outside of the basic scope.

This involves identifying the people and entities that have a connection to customers, such as the ultimate beneficial ownership (UBO) in revealing the true source for wealth as well as funds and business activity. It also investigates mysterious transactions and actions and investigates the underlying connections.

It’s an important tool in the fight against criminal and terrorist financing. However, it’s important to note that EDD should be analyzed on a case-by-case basis. For example, an account opening in the UK with a clean passport, a solid address history and no CCJs may only require CDD. But, another customer might require EDD due to a high volume of cash deposits or complicated transactions.

The best way to determine if EDD is required is to create a comprehensive risk analysis and screening framework. This should include both internal controls as well as external factors like negative media, political instability, sanctions, terrorism financing and organized crime as well as fraud.

Effective due diligence doesn’t mean just meeting regulatory requirements or protecting brand image. It’s about having a real impact in the fight against criminality in the world. You need an identity verification and EDD system that is fast precise, reliable, and cost-effective to accomplish this.