What is enhanced due diligence (EDD)?
Enhanced due diligence (EDD) is the extra set of checks a regulated firm must run on customers and transactions that carry a higher risk of money laundering or terrorist financing. It sits on top of standard KYC and customer due diligence (CDD). The higher the risk, the deeper the checks.
For example, a payments firm onboarding a business owned by a foreign government minister would ask where the company's money comes from. It would also get senior sign-off before opening the account. After that, it would review the account more often than usual.
When is enhanced due diligence required?
EDD is required wherever the risk is higher. Sometimes a rule says so, and sometimes the firm's own checks flag it. The UK's Money Laundering Regulations 2017 (regulation 33) give a typical list of mandatory cases:
- Higher-risk cases: any customer or relationship the firm's own risk assessment rates as high risk
- High-risk countries: customers or transactions linked to a country on the FATF's call-for-action list
- Correspondent relationships: accounts held for other banks or financial institutions, as with nostro and vostro accounts
- PEPs: customers who hold or have held a prominent public role
- False documents: customers who provided false or stolen ID
- Unusual transactions: payments that are unusually complex or large, or a pattern with no clear economic or legal purpose
For high-risk countries, the FATF "calls on all members and urges all jurisdictions to apply enhanced due diligence". In the most serious cases, it calls for countermeasures.
What checks does enhanced due diligence add?
EDD measures depend on the risk, but most rulebooks draw from the same toolkit. The EU's Anti-Money Laundering Regulation applies from July 10, 2027. Its Article 34 lists measures that may include:
- More customer information: extra detail on the customer and their beneficial owners
- Purpose of the relationship: what the customer plans to use the account for
- Source of funds and source of wealth: where the money comes from
- Reasons for transactions: why specific payments are being made
- Senior management approval: sign-off before opening or continuing the relationship
- Enhanced monitoring: more frequent and more detailed reviews of account activity
What evidence do customers provide during EDD?
Most EDD requests come down to proving where money comes from. HMRC's anti-money laundering guidance separates the two questions. Source of funds is "the funds that are being used to fund the specific transaction in hand," such as the proceeds of a sale. Source of wealth is the origin of the customer's "entire body of wealth," meaning how they built up everything they own.
Each question needs different proof:
- For source of funds: bank statements showing enough regular income, or a gift that matches the amount the customer described
- For source of wealth: audited accounts, share registers, property records, crypto wallet records, or bank statements, per HMRC
- Third-party proof: documents from company registries, banks, accountants, lawyers, or notaries, which the Wolfsberg Group lists as reliable sources For a business customer, that usually means the company's audited accounts and ownership records.
How do US, UK, and EU rules on EDD differ?
The three regimes agree on the triggers but write the rules in different ways.
United States. There is no single EDD rule. Instead, FinCEN's regulations set specific EDD duties. Under 31 CFR 1010.610(b), US banks must apply enhanced scrutiny to some correspondent accounts for foreign banks. This covers banks with offshore licenses or from flagged countries.
That includes checking whether the foreign bank lets other banks use its account. For foreign banks that aren't publicly traded, it also means identifying every owner of 10% or more. Under 31 CFR 1010.620(c), private banking accounts for senior foreign political figures need "enhanced scrutiny" to detect the proceeds of foreign corruption.
United Kingdom. Regulation 33 sets the mandatory cases listed above. For high-risk countries, it requires source of funds and wealth checks, senior management approval, and enhanced monitoring.
European Union. From July 10, 2027, the AML Regulation requires EDD for flagged third countries, correspondent relationships, PEPs, and other higher-risk cases the firm identifies.
How does Due handle EDD during onboarding?
Due's KYB process collects the information EDD decisions depend on, and can ask for more when a case needs it. Per Due's business KYB documentation:
- Associated parties are screened: shareholders, beneficial owners, and directors go through identity verification and PEP and AML screening
- Risk questionnaire: the company completes a questionnaire that includes a source of funds question
- Three outcomes: a KYB case is approved, rejected, or sent back for more information
When an EDD review or a request for information needs more data, Due's hosted submission flow handles it. The platform creates a session and sends its user to Due's hosted interface. Details already sent through the API are skipped. The user only sees the steps that are still missing.
For a wider view of onboarding rules across markets, see Due's guide to KYC and AML requirements for cross-border payments.
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