Enhanced Due Diligence
EDD (Enhanced Due Diligence) refers to the heightened verification measures applied to customers presenting a high risk of money laundering or terrorist financing. EDD goes beyond standard Customer Due Diligence (CDD) and requires more thorough checks and increased monitoring.
Enhanced due diligence is mandatory in specific situations defined by regulation: when the customer is a politically exposed person (PEP), when the transaction involves a high-risk third country identified by the European Commission, or when the customer profile presents high-risk factors. Institutions may also trigger EDD based on their own risk assessment.
EDD measures typically include obtaining additional information about the source of funds and wealth, securing senior management approval for the business relationship, increasing the frequency of transaction monitoring, and conducting more thorough document verification. The objective is to understand the economic rationale behind transactions and ensure they are consistent with the customer's declared profile.
CheckFile.ai facilitates EDD implementation by enabling thorough, automated analysis of identity documents and supporting evidence provided by high-risk customers. Multi-layered document verification — authenticity checks, data consistency analysis, and forgery detection — strengthens the reliability of the enhanced due diligence framework.
Regulations
Real-world examples
- 1.A bank applies EDD measures to a new customer identified as a politically exposed person, including verification of the source of wealth and senior management approval.
- 2.A financial institution enhances monitoring of transactions for a client whose funds originate from a country on the EU's high-risk jurisdictions list.
- 3.A wealth management firm requires additional documentation and semi-annual reviews for a client with a complex ownership structure involving multiple offshore jurisdictions.