Enhanced due diligence (EDD) is the additional customer due diligence measures that UK regulated firms must apply when dealing with higher-risk customers, relationships or transactions under the Money Laundering Regulations 2017. Regulation 33 of the MLR 2017 specifies situations that automatically require EDD, including customers who are politically exposed persons (PEPs), correspondent banking relationships, and business relationships or transactions involving high-risk third countries. EDD must include obtaining additional information about the customer, the purpose of the relationship and the source of funds.
Why EDD matters
Applying standard due diligence to a relationship that requires EDD leaves the firm exposed to AML risk and to regulatory action. Conversely, applying EDD unnecessarily adds cost and friction. Firms must have documented policies and procedures to identify when EDD applies and what it involves.
EDD sits on top of the baseline customer due diligence (CDD) every firm must perform; it does not replace it. The depth of additional checks should be proportionate to the assessed risk.
Who it applies to
Compliance, onboarding, and relationship management staff at all firms subject to the MLR 2017.
Related terms
CDD, PEP, beneficial ownership and MLRO.