Enhanced Due Diligence is a stricter level of customer scrutiny applied to higher-risk relationships, typically including source-of-wealth checks and senior management approval.
Enhanced Due Diligence (EDD) is the heightened tier of customer scrutiny mandated by FATF Recommendation 10 paragraph c and FATF Recommendation 19 on high-risk countries.
It applies wherever the institution's risk assessment, the law, or supervisory guidance flags a relationship as higher risk: Politically Exposed Persons, customers from high-risk third countries, complex or non-transparent ownership chains, private banking customers, correspondent banking relationships, and customers in cash-intensive sectors.
The additional measures, on top of standard CDD, typically include obtaining senior management approval before establishing or continuing the relationship, conducting source-of-wealth and source-of-funds checks (not just the immediate transaction source), gathering additional information on the purpose of the relationship, increasing the frequency and depth of ongoing monitoring, and recording the rationale for accepting the elevated risk.
EDD is not a static checklist. It is a documented, proportionate response to identified risk factors, and the institution must be able to demonstrate why each measure was selected and how it mitigates the assessed risk in supervisory examinations.
You will encounter EDD when onboarding a PEP, when your business is in a higher-risk jurisdiction per the EU high-risk third countries list or FATF grey or black lists, when the ownership structure spans several jurisdictions or includes nominees, and when the expected transaction volume or pattern is unusual for your customer profile.
See what a company actually costs in year one, and how the jurisdictions compare on tax, capital and timeline.
