EDD in AML stands for Enhanced Due Diligence in Anti-Money Laundering. According to provided references, EDD is a complex process designed to mitigate the money laundering risks specific to a given organization.
Enhanced Due Diligence (EDD) Explained
EDD goes beyond standard Customer Due Diligence (CDD) procedures. It is implemented when a higher risk of money laundering or terrorist financing is identified. EDD involves a more thorough investigation of the customer, their activities, and the source of their funds.
Key Aspects of EDD
- Deeper Customer Understanding: EDD seeks a more comprehensive understanding of the customer's profile, including their business activities, ownership structure, and geographic location.
- Source of Funds Verification: A critical component of EDD is verifying the legitimacy of the source of funds used in transactions. This might involve reviewing financial statements, bank records, and other relevant documentation.
- Transaction Monitoring: EDD involves enhanced monitoring of transactions to identify any suspicious activity that might indicate money laundering.
- Risk Mitigation: The ultimate goal of EDD is to mitigate the specific money laundering risks that an organization faces. This may involve implementing additional controls or restricting certain types of transactions.
When is EDD Required?
EDD is typically required in situations where there is a higher risk of money laundering, such as:
- High-Risk Customers: This may include politically exposed persons (PEPs), customers from high-risk countries, or those involved in certain industries known for a higher risk of money laundering.
- Complex Transactions: Transactions involving large sums of money, complex ownership structures, or unusual patterns may trigger EDD.
- Unusual Activity: Any suspicious activity or red flags identified during CDD should prompt further investigation through EDD.
