Which is an example of an EDD measure?

Enhanced Due Diligence (EDD) involves taking additional steps beyond standard Customer Due Diligence (CDD) for customers identified as high-risk. Obtaining information on the customer's source of wealth (SoW) is a quintessential EDD measure. It requires a deeper investigation into how the customer accumulated their total assets to ensure they are from legitimate origins. This contrasts with standard CDD, which may only require understanding the source of funds for specific transactions. This measure is critical for managing and mitigating the risks associated with high-risk relationships, such as those with Politically Exposed Persons (PEPs).

A. Verifying the identity of the customer after the establishment of the business relationship: This is incorrect. Customer identity verification is a fundamental part of standard CDD and must be completed before or during the establishment of the relationship, not after.

B. Monitoring an account's transactions based on a monetary threshold: This is a component of standard ongoing monitoring applied to all customer accounts, not an enhanced measure specific to high-risk customers.

D. Identifying the purpose and nature of the business relationship: This is a core requirement of standard CDD for all customers, necessary to establish a baseline for expected account activity.

1. Financial Action Task Force (FATF). (2012-2023). International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation – The FATF Recommendations. Paris: FATF/OECD.

Reference: Interpretive Note to Recommendation 10 (Customer Due Diligence)

Paragraph 19. This section explicitly lists "obtaining information on the source of funds or source of wealth of the customer" as an example of an EDD measure for higher-risk customers. It also confirms that understanding the purpose and intended nature of the business relationship is a standard CDD requirement.

2. King's College London

Centre for the Study of Corruption. (2021). KYC/CDD: Know Your Customer/Customer Due Diligence. Courseware on Anti-Corruption and Law.

Reference: Module 3: Key AML/CFT Tools. The material distinguishes between CDD and EDD

noting that EDD for high-risk clients (e.g.

PEPs) requires additional steps such as "establishing the source of wealth and source of funds."

3. The Wolfsberg Group. (2020). Frequently Asked Questions (FAQs) on Source of Wealth (SoW) and Source of Funds (SoF).

Reference: Page 2

Section "What is the difference between SoW and SoF?". The document clarifies that establishing SoW is a key element of EDD

stating

"For customers that are assessed as high risk... FIs are generally required to take additional measures to mitigate the risk

which includes the establishment of that customer’s SoW."