Enhanced Due Diligence (EDD )

What is EDD?

EDD is an advanced risk management process that forms part of the Know Your Customer, or KYC, process and extends the regular due diligence measures to gain a deep understanding of the risks associated with either a customer or business relationship. 

Whereas the due diligence traditionally performed would involve identification and some form of shallow background checks, EDD does take a deeper view by considering a wide array of factors.

During the performance of Enhanced Due Diligence, financial institutions and businesses may make inquiries into the source of funds, beneficial ownership structures, connections with politically exposed persons (PEPs), and complex ownership hierarchies. It gives a larger scope for the identification of possible vulnerabilities and assurance of deeper risk assessment.

High-Risk Customers That Demand Enhanced Due Diligence

There are particular kinds of customers or business relationships that are regarded as being of a higher risk and, hence, call for Enhanced Due Diligence. These include:

• PEPs: A person holding a prominent position in public office or is related to a political figure.
• Foreign Customers: Customers or organisations whose residence or place of operation is a country perceived as having a high money laundering or corruption risk.
• Complex Corporate Structures: Those companies that have complicated ownership structures or accounts offshore, which may be involved in illegal activities.
• Cash-Intensive Businesses: The kind of business that includes a lot of cash on a regular basis, such as casinos and money service providers.

With EDD in place for these high-risk categories, organisations can better manage their risk exposure and follow regulatory requirements.