What is the main purpose of conducting Enhanced Due Diligence?

The main purpose of conducting Enhanced Due Diligence (EDD) is to manage and mitigate identified higher risks associated with customers, transactions, or business relationships. EDD is particularly relevant in situations where there are factors that suggest a heightened risk of involvement in money laundering, terrorist financing, or other financial crimes. By implementing EDD measures, financial institutions and businesses can gain a more comprehensive understanding of the risks connected to a particular client or transaction.

This process often involves gathering additional information, conducting more thorough background checks, and continuously monitoring transactions for unusual activity. By doing so, organizations can better protect themselves against potential risks and ensure compliance with regulatory standards. Enhanced Due Diligence is therefore a critical tool in the broader framework of risk management within the financial services sector.