Enhanced Due Diligence (EDD)
What is enhanced due diligence (EDD)?
How does enhanced due diligence work?
- Collecting additional customer information. The organization may request evidence about the customer’s occupation, business activities, assets, expected transactions, or reason for opening the account.
- Examining beneficial ownership and control. For a legal entity, the organization may require further evidence about the natural persons who ultimately own or control it.
- Establishing source of funds or source of wealth. Source of funds concerns the money used for a transaction or relationship. Source of wealth explains how the customer acquired their overall wealth.
- Investigating unusual activity. The organization may examine the background and purpose of complex or unusually large transactions, or activity with no clear economic or lawful purpose.
- Obtaining senior management approval. Certain higher-risk relationships may require approval before they begin or continue.
- Increasing ongoing monitoring. The organization may review transactions more closely and update customer information more often.
When is enhanced due diligence required?
- A foreign politically exposed person (PEP), or another PEP relationship assessed as higher risk
- A customer or transaction connected with a higher-risk jurisdiction
- A complex, opaque, or unusual ownership structure
- Private banking or certain correspondent banking relationships
- Unusual activity that conflicts with the customer’s known profile
- Doubts about previously collected identity or beneficial-ownership information
How can Regula help with enhanced due diligence (EDD)?
FAQ
How is enhanced due diligence different from customer due diligence?
Customer due diligence identifies and verifies the customer, examines beneficial ownership where applicable, establishes the purpose of the relationship, and supports ongoing monitoring. EDD adds measures proportionate to a higher risk. It strengthens CDD for a particular case instead of replacing it.
Does every politically exposed person require the same EDD measures?
No. FATF standards call for additional measures for foreign PEPs. For domestic PEPs and people entrusted with a prominent function by an international organization, those measures apply when the relationship is high risk. National rules may set broader requirements.
How long does enhanced due diligence take?
There is no standard completion time. A case involving a clear ownership structure and readily available evidence may be resolved quickly, while complex ownership, missing records, or source-of-wealth checks can require more time. The organization’s review and approval process also affects the timeline.
Who approves a customer after enhanced due diligence?
Applicable law and the organization’s policy determine who can approve or continue a higher-risk relationship. Some cases require senior management approval, including relationships with foreign PEPs under FATF standards. The approval record should include the risks, evidence, conditions, and reasons for the decision.
Does enhanced due diligence continue after onboarding?
Yes. EDD usually continues for as long as the relationship remains high risk. New transactions, ownership updates, screening results, geographic exposure, or doubts about earlier information may prompt another review.
