# Enhanced due diligence (EDD)

**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

- [Customer due diligence (CDD)](/glossary/customer-due-diligence/)
- [Source of funds](/glossary/source-of-funds/)
- [Source of wealth](/glossary/source-of-wealth/)
- [High-risk third countries](/glossary/high-risk-third-countries/)
- [Four-eyes principle](/glossary/four-eyes-principle/)

Canonical: https://proofvolt.eu/glossary/enhanced-due-diligence/