Which anti-money laundering control is specifically applied to high-risk customers?

Which anti-money laundering control is specifically applied to high-risk customers?

• A. Customer Due Diligence (CDD)
• B. Enhanced Due Diligence (EDD)
• C. Suspicious Activity Reporting (SAR) and Ongoing Transaction Monitoring
• D. Record-Keeping

Answer: (B)

The main idea here is that customers deemed high risk require intensified verification and ongoing scrutiny beyond the standard checks applied to everyday customers. In a typical AML program, you start with Customer Due Diligence to establish identity, understand the customer’s business, and determine the normal pattern of activity. But when risk factors push a customer into a higher category—for example, unusual transaction activity, complex ownership structures, or involvement with high-risk jurisdictions—the process steps up to Enhanced Due Diligence. Enhanced Due Diligence expands the baseline by gathering more detailed information and evidence about the customer, their beneficial ownership, and the source of funds and wealth. It also calls for closer, ongoing monitoring of transactions, more frequent reviews or reassessments of risk, and often additional controls such as requiring senior management approval for certain transactions or relationships, enhanced sanctions and PEP checks, and more robust documentation. The goal is to reduce the chance that illicit money can flow through the account by maintaining a tighter, more proactive watch on those higher-risk customers. Record-keeping and ongoing monitoring are important across the board, and suspicious activity reporting is triggered by unusual or suspicious behavior in any customer relationship. But the specific control that is designed to address high-risk customers with extra layers of verification and oversight is Enhanced Due Diligence.

The main idea here is that customers deemed high risk require intensified verification and ongoing scrutiny beyond the standard checks applied to everyday customers. In a typical AML program, you start with Customer Due Diligence to establish identity, understand the customer’s business, and determine the normal pattern of activity. But when risk factors push a customer into a higher category—for example, unusual transaction activity, complex ownership structures, or involvement with high-risk jurisdictions—the process steps up to Enhanced Due Diligence.

Enhanced Due Diligence expands the baseline by gathering more detailed information and evidence about the customer, their beneficial ownership, and the source of funds and wealth. It also calls for closer, ongoing monitoring of transactions, more frequent reviews or reassessments of risk, and often additional controls such as requiring senior management approval for certain transactions or relationships, enhanced sanctions and PEP checks, and more robust documentation. The goal is to reduce the chance that illicit money can flow through the account by maintaining a tighter, more proactive watch on those higher-risk customers.

Record-keeping and ongoing monitoring are important across the board, and suspicious activity reporting is triggered by unusual or suspicious behavior in any customer relationship. But the specific control that is designed to address high-risk customers with extra layers of verification and oversight is Enhanced Due Diligence.