Enhanced due diligence (EDD) is a form of customer due diligence (CDD) which is used by financial institutions and businesses to manage and mitigate risks associated with higher-risk customers or transactions and involves more rigorous checks and closer scrutiny than those in CDD.

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Another critical part of Know Your Customer (KYC) processes - involving advanced investigative processes, EDD extends beyond standard due diligence procedures, requiring a more comprehensive and detailed examination to ensure thorough risk assessment and regulatory compliance. Basically, EDD enhances the standard KYC process, providing additional safeguards against financial crimes.

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EDD is typically applied to scenarios where there is a higher potential for involvement in financial crimes such as money laundering, terrorist financing or other illicit activities. This includes dealing with politically exposed persons (PEPs), individuals or entities from high-risk jurisdictions, and complex corporate structures. It is also relevant for large or unusual transactions that deviate from a customer's normal activity patterns.

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The process of EDD involves in-depth customer identification and verification, which includes collecting detailed information about the customer’s identity, source of funds and source of wealth. This often necessitates verifying additional documents and utilizing third-party databases to perform additional screening and confirm the accuracy of the information provided. Also often included are additional investigations into the customer’s business relationships, as well as any adverse media coverage. Furthermore, EDD entails a detailed risk assessment, considering various factors such as geographic, industry and transactional risks.

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Beyond the initial EDD, ongoing monitoring is also a crucial part of enhanced due diligence, as it helps detect any unusual or suspicious activities that may arise after the initial assessment.

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