When to Apply Enhanced Due Diligence
In brief: Apply enhanced due diligence when the client, matter, transaction, geography, ownership, screening result, or delivery channel creates higher AML risk.
Key points
- EDD is a risk response, not a punishment.
- The trigger should be clear before asking for extra evidence.
- If the risk remains unclear after EDD, escalate before accepting or continuing.
When should enhanced due diligence be applied?
Enhanced due diligence should be applied when standard CDD does not give the firm enough comfort for the risk. The trigger may come from the client, ownership, matter, funds, country exposure, PEP status, sanctions context, adverse media, or the way the client is onboarded.
Decision questions
- What fact makes this higher risk?
- What extra evidence would clarify the risk?
- Who needs to approve the decision?
- How often should the file be reviewed?
- What would make the firm decline or exit?
Good file note
"EDD applied because the client structure includes overseas ownership and funds from a recent asset sale. Reviewed company records, beneficial ownership evidence, bank trail, and sale agreement. Risk remains medium-high. MLRO approved continuation with six-month review."
This guide is general information, not legal advice. Check MLR 2017 Regulation 28, GOV.UK's money laundering supervision responsibilities, HMRC's CDD testing guidance, and your supervisor's current sector guidance before making a compliance decision.