What triggers enhanced due diligence (EDD) in AML/KYC?

What triggers enhanced due diligence (EDD) in AML/KYC?

• A. A risk assessment evaluates money-laundering risk of a patron based on identity, source of funds, geography, and behavior.
• B. EDD is required for every customer regardless of risk.
• C. EDD is determined solely by customer age.
• D. Large or unusual activity, high-risk jurisdictions, or complex ownership structures.

Answer: (C)

Enhanced due diligence is applied when risk signals indicate a higher chance of illicit activity, so the focus is on factors that show unusual or complex patterns rather than personal demographics. The strongest triggers are observing large or unusual transactions, activity that doesn’t fit the customer’s profile, dealings with high‑risk jurisdictions, or entities with complex, opaque ownership structures. These indicators prompt deeper verification and ongoing scrutiny—such as more thorough sourcing of funds, closer look at beneficial ownership, and tighter monitoring—above standard due diligence. Age or simple demographics do not by themselves trigger enhanced due diligence, and EDD isn’t performed for every customer. It’s driven by risk indicators and the need to mitigate potential money laundering or other financial crimes.

Enhanced due diligence is applied when risk signals indicate a higher chance of illicit activity, so the focus is on factors that show unusual or complex patterns rather than personal demographics. The strongest triggers are observing large or unusual transactions, activity that doesn’t fit the customer’s profile, dealings with high‑risk jurisdictions, or entities with complex, opaque ownership structures. These indicators prompt deeper verification and ongoing scrutiny—such as more thorough sourcing of funds, closer look at beneficial ownership, and tighter monitoring—above standard due diligence.

Age or simple demographics do not by themselves trigger enhanced due diligence, and EDD isn’t performed for every customer. It’s driven by risk indicators and the need to mitigate potential money laundering or other financial crimes.