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In a perfect storm of increased financial crime risk, growing AML regulations, and the need to...
A brief guide to Enhanced Due Diligence: what it is, when it's required, and how modern AI tools are transforming the process.
Enhanced Due Diligence (EDD) represents the most thorough level of customer or partner investigation required by regulated firms. While standard due diligence (also known as Customer Due Diligence or CDD) might involve identity verification and sanctions screening, EDD goes much deeper—requiring comprehensive research into an individual's or organisation's background, source of wealth, business activities, and potential risks.
Customer Due Diligence (CDD) vs Enhanced Due Diligence (EDD)
Customer Due Diligence (CDD) is the baseline level of investigation required for all customers and includes:
- Identity verification via database checks, official ID documents and biometric comparison from selfie to ID document
- Sanctions and PEP screening
- Understanding the nature of the customer's business
- Ongoing monitoring of transactions and activities
Enhanced Due Diligence (EDD) goes significantly deeper and should include:
- Comprehensive background research and investigation
- Source of wealth and source of funds analysis
- Extensive adverse media and reputation screening
- In-depth analysis of business relationships and connections, and where relevant, beneficial ownership
When is Enhanced Due Diligence Required?
EDD is typically triggered by specific risk factors that indicate a higher potential for money laundering, terrorist financing, other financial crimes or reputational risk. These triggers include:
High-risk customers:
- Politically Exposed Persons (PEPs) and their family members
- Individuals from high-risk jurisdictions
- Customers involved in cash-intensive businesses
- Non-resident customers
- Customers with complex ownership structures
Suspicious activity indicators:
- Unusual transaction patterns or amounts
- Inconsistent information during onboarding
- Adverse media mentions or regulatory concerns
- Sanctions or watchlist matches requiring ratification or discounting
Regulatory Requirements:
- AML regulations across jurisdictions mandate EDD for certain customer categories
- Financial Action Task Force (FATF) guidelines specify when enhanced measures are necessary
- Industry-specific regulations may impose additional EDD requirements
The traditional EDD process
Historically, EDD has been a manual, resource-intensive process involving:
1. Information Gathering: Compliance analysts search multiple databases, websites, and public records to collect information about the subject. This includes:
- Business registries and corporate filings
- Court records and legal proceedings
- Professional and social media profiles
- Property and asset records
- Media coverage and news articles
2. Source Verification: Each piece of information must be verified against multiple sources to ensure accuracy and reliability. This involves cross-referencing data and assessing source credibility
3. Risk Assessment: Analysts evaluate the collected information to identify potential risks such as:
- Criminal activity or legal proceedings
- Connections to sanctioned individuals or entities
- Politically exposed person (PEP) status
- Adverse media coverage or reputational issues
- Complex ownership structures that may obscure beneficial ownership
4. Documentation and Reporting: All findings must be documented with proper source citations and compiled into comprehensive reports that can withstand regulatory scrutiny.
The trend from manual EDD towards AI-powered EDD processes
As organisations seek to operationalise the benefits of AI, compliance teams are no exception. Platforms like DeepDive are leading the way to re-imagine how EDD is delivered. Here’s a handy comparison of manual vs AI powered EDD
Manual vs AI powered EDD– a comparison table
The Future of Enhanced Due Diligence
As regulatory requirements continue to evolve and the volume of required due diligence grows, AI-powered solutions are becoming essential for organizations to maintain compliance while controlling costs. The most effective approaches combine the thoroughness and analysis capabilities of AI with human expertise for final risk assessment and decision-making.
The evolution from manual to AI-enhanced EDD represents a fundamental shift from time-intensive research to intelligence-focused analysis, enabling compliance teams to handle greater volumes of investigations with higher quality outcomes.
Ready to transform your Enhanced Due Diligence process?
Modern AI-powered knowledge engines like DeepDive are helping compliance teams deliver faster, more comprehensive EDD while reducing costs and improving regulatory compliance.
Request a demo here to see how automated EDD can transform your compliance workflows.
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