Table of contents
Enhanced due diligence (EDD) is the higher tier of customer due diligence applied when a customer, product or jurisdiction presents elevated money-laundering risk. It adds source of funds and source of wealth evidence, adverse media screening, senior management approval and closer ongoing monitoring on top of standard CDD.
Where standard customer due diligence asks who the customer is and why they want the account, enhanced due diligence asks where the money came from, who stands behind the customer, and whether the explanation holds up. It supplements CDD and never substitutes for it.
When is enhanced due diligence required?
Some triggers are written into law and leave no discretion. Others come from the firm’s own risk assessment.
- Politically exposed persons. FATF Recommendation 12 requires EDD for foreign PEPs, their family members and close associates; the EU applies it to domestic PEPs as well.
- Correspondent banking. Section 312 of the USA PATRIOT Act requires risk-based due diligence for foreign correspondent accounts and enhanced due diligence for foreign banks operating under an offshore licence or in a jurisdiction of primary money-laundering concern.
- Private banking accounts for non-US persons. The same Section 312 rules require the nominal and beneficial owners and the source of funds to be identified.
- High-risk jurisdictions. Exposure to countries on the FATF call-for-action list requires EDD as a minimum, and often countermeasures.
- Your own risk assessment. Opaque or layered ownership, cash-intensive businesses, unexplained geographic distance and activity that does not match the stated purpose of the account all belong in EDD whether or not a rule names them.
What does EDD add to standard CDD?
| Control | Standard CDD | Enhanced due diligence |
|---|---|---|
| Identity | Verified identity of the customer and of beneficial owners | The same, plus tracing through layered entities, trusts and nominee arrangements |
| Money | Expected activity established at onboarding | Documented source of funds and source of wealth, evidenced rather than self-declared |
| Screening | Sanctions, PEP and watchlist screening | The same, plus adverse media screening across credible sources |
| Approval | Handled within onboarding | Senior management approval before the relationship opens or continues |
| Monitoring | Risk-based thresholds and periodic review | Lower alert thresholds and shorter review cycles |
Where to go deeper
The full guide, with the escalation criteria, the EDD checklist and the mistakes examiners cite most often, is at enhanced due diligence: when and how to apply it. For the operational build, from trigger to documented decision, see enhanced due diligence workflows. The wider obligation that EDD sits inside is customer due diligence.
Written by Michelangelo Frigo (Co-Founder at Zyphe) Reviewed September 21, 2026 Michelangelo Frigo is a privacy and identity infrastructure expert and co-founder of Zyphe.