FAQs

What is enhanced due diligence?

Enhanced Due Diligence (EDD) is a more comprehensive form of due diligence conducted when an individual, organization, or transaction presents elevated risk. It goes beyond standard verification to confirm an entity’s legal standing, regulatory compliance, financial stability, ownership structure, and overall reputational integrity.

The goal is to provide a thorough risk assessment before entering a business relationship, transaction, or partnership.

Who requires enhanced due diligence?

EDD is typically required for higher-risk situations, such as dealings with politically exposed persons (PEPs), companies operating in high-risk jurisdictions, new partners with complex ownership structures, or transactions involving large or unusual financial activity.

Due diligence is often required or mandated by regulatory frameworks to help prevent money laundering, corruption, sanctions and export control violations, and human rights abuses in supply chains.

What is EDD and who is it done for?

Enhanced Due Diligence (EDD) is performed on any individual or entity that poses a greater-than-usual risk and therefore requires more thorough confirmation of identity, ownership, reputation, and intent. For example, EDD may be conducted when a customer seeks to purchase a dual-use item to help ensure the product is not diverted to an improper or prohibited end user.

What triggers enhanced due diligence?

EDD is typically triggered when risk indicators identified during KYC or onboarding exceed established thresholds. 
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Common triggers include:
- complex corporate structures or offshore entities
-negative media coverage or regulatory scrutiny related to the individual or organization
-high-value transactions or material concentrations involving controlled or critical products

How long does EDD usually take?

Depending on complexity and jurisdiction, an EDD investigation can take anywhere from 15-30 days to complete.

What are EDD red flags?

- Unusual transaction volumes, sudden or irregular financial patterns, or unusually large/inconsistent income sources
- Conflicting or vague identity or ownership information, including complex corporate structures
- History of regulatory violations
- Attempts to obscure the end user of a product or orders inconsistent with normal business activity
- Links to state-owned or high-risk entities in restricted jurisdictions

What is the difference between CDD and EDD?

Customer due diligence (CDD) is the baseline process for understanding who a customer is and why they engage with your institution. It involves verifying identification documents (e.g., government IDs) and conducting preliminary checks for potential red flags.

CDD is generally sufficient for low- to moderate-risk clients and ensures compliance with anti-money laundering (AML) regulations.

‍Enhanced due diligence (EDD) is applied to higher-risk customers. It goes beyond standard verification to assess how a relationship or transaction might expose the institution to risk. 

EDD is investigative and continuous, focusing on the customer’s intent, ownership structure, behavior, and overall risk profile.

What is VDD vs CDD?

VDD (Vendor Due Diligence) specifically evaluates third-party vendors for potential legal, financial, and reputational risks before engagement. 

CDD (Customer Due Diligence) is a broader know-your-customer (KYC) process focused on understanding and assessing the risks associated with customers or clients.

Can EDD look at your bank account?

Enhanced due diligence does not directly access your bank account unless legally authorized. Instead, EDD relies primarily on documented financial records, public filings, and reported transactions to assess financial risk and integrity.

What are the 4 P’s of due diligence?

People – Who is involved? Owners, executives, PEPs.
‍Process – How is the business run? Policies, governance, compliance. 
Paper – Documentation, contracts, filings, licenses.
‍Performance – Financial performance, market reputation, risk history.

What are the benefits of enhanced due diligence?

The main goal of enhanced due diligence is to identify and mitigate potential risks before entering a new business relationship. By conducting investigations, companies can avoid legal penalties, financial losses, and reputational harm.

How does enhanced due diligence work?

EDD begins when a risk assessment identifies the need for a deeper investigation. The process involves collecting open-source (OSINT) and human intelligence (HUMINT) data, reviewing corporate records, financial statements, litigation history, regulatory filings, media coverage, and analyzing ownership structures and key relationships.

All findings are then compiled into a detailed report, highlighting potential red flags and providing actionable recommendations for risk mitigation.

When should EDD be conducted?

EDD should be performed before engaging in high-risk partnerships, mergers, or acquisitions, when dealing with politically exposed persons (PEPs) or entities in politically sensitive jurisdictions, or if initial customer due diligence (CDD) raises red flags. It is also required whenever regulatory or contractual obligations mandate a deeper review to manage elevated risk.

What is level 3 enhanced due diligence?

The most intensive level of EDD. Includes global background checks, forensic accounting, legal investigations, and extensive interviews. Often used in high-risk acquisitions, major government contracts, or suspicious transaction investigations.