Enhanced Due Diligence (EDD)

Definition

Enhanced Due Diligence (EDD) is an intensified version of Customer Due Diligence (CDD), required when a customer, transaction, or circumstance presents a higher-than-normal risk. It involves obtaining additional information, carrying out more thorough verification, and increasing ongoing monitoring.

EDD is mandated by the UK’s Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 in certain situations, such as dealing with PEPs or clients from high-risk third countries.

Why it matters

EDD is a legal safeguard against being exploited for money laundering or terrorist financing. It goes beyond standard identity verification, providing a more detailed understanding of a customer’s background, ownership structure, source of funds, and source of wealth.

From May 2025, EDD also incorporates mandatory sanctions screening for certain high-value transactions, ensuring no sanctioned individual or entity is involved.

How EDD works in the UK

1. Identify high-risk cases – Triggered by client type, transaction size, geography, product, or delivery channel.
2. Obtain additional information – Collect more detailed identity data, business background, and transaction purpose.
3. Verify to a higher standard – Use multiple, reliable sources and independent verification methods.
4. Check source of funds and source of wealth – Obtain documentary evidence to ensure legitimacy.
5. Apply ongoing monitoring – Increase transaction scrutiny, frequency of reviews, and adverse media checks.
6. Record keeping – Document why EDD was applied and what additional measures were taken.

Examples and use cases

• PEP onboarding – Applying extra checks on a senior foreign government official and their associates.
• Complex offshore structures – Verifying ultimate beneficial ownership through multiple jurisdictions.
• High-value asset purchase – Carrying out in-depth checks before completing a multi-million-pound transaction.
• High-risk jurisdictions – Enhanced verification for clients based in countries with weak AML regimes.

Mini-FAQ

Q: How is EDD different from CDD?
A: CDD applies to all customers; EDD is additional and more detailed, applied only where there is higher risk.

Q: Can EDD be applied voluntarily?
A: Yes. Even when not mandated, firms may choose to apply EDD as part of a risk-based approach. DOS & Co., for example, carries out EDD on all paying parties for transactions of more than £10,000.