EDD stands for Enhanced Due Diligence. In banking, EDD is a critical part of the Know Your Customer (KYC) compliance process. It involves gathering more in-depth information about customers to verify their identities and assess their money laundering and terrorist financing risks. Here’s a breakdown of EDD in banking:
More Scrutiny Compared to CDD: EDD is a more intensive process compared to Customer Due Diligence (CDD). CDD is the basic level of KYC that banks perform on all customers. EDD goes beyond CDD by requiring additional information and verification procedures.
Identifying Higher-Risk Customers: Banks use EDD to identify customers who pose a higher risk of money laundering or terrorist financing. These customers may include:
- Politically Exposed Persons (PEPs)
- High-net-worth individuals (HNWIs)
- Customers from high-risk countries
- Customers involved in complex or unusual transactions
Information Gathering in EDD: During EDD, banks may collect the following information from customers:
- Beneficial ownership information
- Source of wealth or income
- Transaction history
- Business purpose and nature
- References
By collecting this additional information, banks can better understand their customers and mitigate the risks associated with money laundering and terrorist financing.
