Enhanced due diligence (EDD)
Checked against the official texts on .
Enhanced due diligence (EDD) is the additional scrutiny a regulated firm must apply when a customer, relationship or transaction presents a higher risk of money laundering or terrorist financing — for example more information on ownership and the source of funds, senior management approval, and closer monitoring. EDD adds to standard customer due diligence; it does not replace it.
Also called: enhanced CDD.
Why it matters for PSPs and EMIs
Payment and e-money institutions meet higher-risk situations every day: merchants in cash-intensive or high-risk sectors, complex ownership, customers linked to high-risk third countries, and politically exposed persons. The supervisor's question is whether higher risk was recognised and whether the response was proportionate and documented.
What the law says
When EDD is mandatory. AMLR Art. 34(1): in the cases in Arts. 29, 30, 31 (third-country risks) and 36 to 46 (including correspondent relationships and politically exposed persons), and in any other higher-risk case the firm identifies under Art. 20(2).
Unusual transactions. AMLR Art. 34(2): examine the origin and destination of funds and the purpose of transactions that are complex, unusually large, conducted in an unusual pattern, or without an apparent economic or lawful purpose.
Risk factors. AMLR Art. 34(3) and Annex III (for example: an unusual or excessively complex ownership structure, nominee shareholders or bearer shares, cash-intensive businesses, links to higher-risk geographies).
The measures. AMLR Art. 34(4)(a) to (g), applied in proportion to the risk: additional information on the customer and beneficial owners; on the intended nature of the relationship; on the source of funds and source of wealth; on the reasons for transactions; senior management approval; enhanced monitoring; and a first payment through an account in the customer's name at a credit institution.
Politically exposed persons. AMLR Art. 42(1): senior management approval, adequate measures to establish source of wealth and source of funds, and enhanced ongoing monitoring.
Until 10 July 2027. Directive (EU) 2015/849, Arts. 18 to 24, as transposed nationally; EBA Guidelines EBA/GL/2021/02 (ML/TF risk factors), Guideline 4.
International standard. FATF Recommendations 10, 12 and 19.
How ProofVolt handles it
In ProofVolt, a confirmed politically-exposed-person match, or a link to a country on the EU list of high-risk third countries, moves a case to enhanced due diligence. At that level, approval needs a second approver, and it is blocked until the customer's source of funds and source of wealth are on file, unless the officer records a reasoned override. A risk never disappears: no later document, round or AI output can quietly clear it. Each conclusion appears on the case's receipt with its source.
Related
Sources
Informational only, not legal advice.