Enhanced Due Diligence (EDD)
Enhanced Due Diligence (EDD) is an aspect of financial institutions' compliance procedures when there is a suspicion of higher risk. It involves collecting detailed information to verify clients' identities and assess the money laundering risk associated with each customer. Consequently, clients are typically required to provide significantly more information during the EDD process, as this information is essential for mitigating associated risks.
The FATF recommends several practical measures for implementing EDD:
Gathering more identifying information from diverse and reliable and independent sources.
Ordering an intelligence report on the customer or beneficial owner to gain better insights into potential involvement in illegal activities.
Verifying the source of cash or wealth in commercial partnerships.
Acquiring more information from the consumer regarding the purpose and nature of the business relationship.
Furthermore, the FATF suggests that financial institutions adopt a risk-based monitoring strategy to detect any suspicious behaviour or changes in the risk profile of customers over time.
