What is EDD and who is it done for?
Enhanced Due Diligence (EDD) is a regulatory requirement for regulated entities dealing with high-risk customers.
A customer is said to pose a higher Money Laundering/ Terrorism Financing (ML/TF) risk if:
- The customer or beneficial owner (where the customer is a legal entity) is a Politically Exposed Person (PEP) or a family member or close associate of a PEP
- There are adverse media circulations against the customer
- The customer belongs to or has a close association with high-risk jurisdictions having weak Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) controls, such as countries that are subject to FATF’s Call for Action
- Any concerned authority notifies that the customer poses an increased risk of ML/TF
- The regulated entity infers any red flag or potential risk indicator based on the customer’s activities
For such high-risk customers, regulated entities can undertake EDD by - Seeking approval of the senior management before transacting with the customer
- Establishing the income level of the customer and identifying the source of funds and source of wealth of the customer as well as beneficial owner
- Conducting ongoing monitoring of the transactions and the business relationship
- Placing additional checks to verify customer information
Unlock the essentials of Enhanced Due Diligence with this informative illustration