Customer due diligence, or CDD, is the standard set of checks for most accounts: identity, address, purpose, and a basic risk rating. Enhanced due diligence, or EDD, goes further and applies when risk is higher. The difference is about matching the depth of checking to the risk in front of you.
When EDD usually applies
- The customer is a politically exposed person, or closely connected to one, which raises the chance of misuse of public position.
- The customer comes from a country with weak controls against financial crime, or the funds pass through one.
- The account structure is complex, such as layered companies with no clear business reason for the layers.
- Earlier activity already raised a question that standard checks could not answer.
In EDD, expect to ask for source of wealth, not just source of funds, and to refresh files more often. Document why EDD was chosen, so a reviewer sees the risk trigger, not just extra paperwork.