Enhanced Due Diligence (EDD )

What is EDD?

Enhanced Due Diligence (EDD) is an advanced risk management process that is a part of Know Your Customer(KYC) process and goes beyond the standard due diligence measures to provide a thorough understanding of the risks associated with a customer or business relationship. While traditional due diligence typically focuses on verifying identity and conducting basic background checks, EDD takes a more detailed approach by examining a broader range of factors.

When performing Enhanced Due Diligence, financial institutions and businesses may investigate aspects such as the source of funds, beneficial ownership structures, connections to politically exposed persons (PEPs), and complex ownership hierarchies. This comprehensive analysis helps identify potential vulnerabilities and ensures a more robust risk assessment.

High-Risk Customers That Require Enhanced Due Diligence

Certain types of customers or business relationships are deemed higher risk and therefore necessitate Enhanced Due Diligence. These include:

– Politically Exposed Persons (PEPs): Individuals who occupy prominent public positions or have connections to political figures.

– Foreign Customers: Customers or entities located in countries that pose a high risk of money laundering or corruption.

– Complex Corporate Structures: Companies with intricate ownership configurations or offshore accounts that may be linked to illicit activities.

– Cash-Intensive Businesses: Businesses that predominantly handle large amounts of cash, such as casinos or money service providers.

By implementing EDD for these high-risk categories, organisations can better manage their risk exposure and comply with regulatory requirements.