What is Enhanced Due Diligence (EDD)?
Enhanced due diligence (EDD) is the higher level of scrutiny that applies when a customer presents a higher risk of money laundering or terrorist financing. It goes beyond standard customer due diligence by requiring more evidence, more analysis and closer oversight.
In the UK, EDD is required by the Money Laundering Regulations 2017; in the EU it follows the AML directives.
When EDD applies
Typical triggers include:
- a customer who is a politically exposed person, or a family member or close associate of one
- a customer resident in, or connected to, a high-risk third country
- complex or opaque ownership structures
- high-risk products or delivery channels
- transactions that are unusual for the customer
What EDD involves
Enhanced due diligence usually means:
- establishing the source of funds and the source of wealth in detail
- obtaining senior management approval to establish or continue the relationship
- gathering additional evidence and corroborating documents
- applying enhanced ongoing monitoring, with more frequent reviews
UK supervisors, including the FCA, expect firms to keep records that show why a customer was assessed as higher risk and what additional measures were taken.
EDD, CDD and SDD
Due diligence comes in tiers. Standard due diligence applies to most customers. Enhanced due diligence applies to higher risk. A lighter, simplified due diligence may apply in narrowly defined lower-risk cases, but simplified measures never remove the obligation to identify the customer.
Making EDD repeatable
EDD is evidence-heavy, which is where automation helps. Hyperflow runs PEP, sanctions and company checks through an API, so the evidence for an enhanced review is gathered and stored consistently.