Enhanced Due Diligence or ‘EDD’ is a KYC process of carrying out further due diligence on customers that may be seen to be more high risk to mitigate regulatory issues. This may be with PEPs or ‘Politically Exposed Persons’, sanctioned entities or individuals or other profiles that fit a higher level of risk category.
Additional ‘red flags’ are the; location of the business, occupation or nature of the business, the purpose of the business transactions, the expected pattern of activity in terms of transaction types, dollar volume, and frequency, expected origination of payments & method of payment, articles of incorporation, partnership agreements & business certificates, identification of beneficial owners of an account or customer, details of other personal & business relationships the customer maintains, approximate salary or annual sales, AML policies & procedures in place, third-party documentation, local market reputation & review of adverse media sources, etc.
Whilst normal Customer Due Diligence encompasses AML/KYC/CFT checks, EDD typically includes deeper identity verification, risk/reward benefits of transacting with the customer in regards to Adverse Media and a brief investigation into the Source of Funds (SoF) that is required to be performed for those clients and relationships that have been identified as presenting the greatest risk of financial crimes.
- Introduction to Risk-Based Approach to Virtual Currencies
- Risk-Based Approach to Virtual Currencies: 5th AML Directive