EDD (Enhanced Due Diligence) is a more in-depth form of customer due diligence required in higher-risk situations, such as when dealing with politically exposed persons (PEPs), customers from high-risk countries, or transactions that present a higher risk of money laundering or terrorist financing. EDD measures may include obtaining additional information about the customer, the source of funds, and the purpose of the transaction, as well as increased monitoring of the business relationship (Citation: UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 33).

• Customers with known PEP (Politically Exposed Person) status or connections. Implement enhanced due diligence measures for PEPs, including obtaining senior management approval, identifying the source of funds, and conducting ongoing monitoring (JMLSG Guidance, Part 1, Section 5.5.7).

• Transactions with no apparent economic or legal purpose or transactions that are overly complex. Conduct enhanced scrutiny and document findings, including the background and purpose of such transactions (FATF Recommendation 10, Interpretive Note to Recommendation 10, Paragraph 21).

• Sudden increase in transaction volume or frequency without a clear explanation. Perform enhanced due diligence and ongoing monitoring to determine the reason for the change in activity (FATF Recommendation 10, Interpretive Note to Recommendation 10, Paragraph 19).

• Customers or transactions involving shell companies. Require identification and verification of beneficial owners, and conduct enhanced due diligence for higher risk situations (FATF Guidance on Transparency and Beneficial Ownership, Section 3.3).

• Transactions with mixing services or privacy coins. Apply enhanced due diligence measures and develop risk mitigation policies for the use of privacy coins or mixing services (5AMLD – Article 47, and UK Money Laundering Regulations 2017 (MLR 2017) – Regulation 28(12)).

• Rapid and frequent transactions between multiple wallets without a clear purpose. Conduct transaction monitoring and enhanced due diligence on unusual transaction patterns (Joint Money Laundering Steering Group (JMLSG) Guidance, Part 1 – Section 5.3.7).

• Transactions linked to darknet marketplaces or illegal goods and services. Implement ongoing monitoring and report any suspicious activities to the relevant authorities (Proceeds of Crime Act 2002 (POCA) – Section 328).

• Transactions involving known or suspected criminal addresses, such as those published on the Office of Foreign Assets Control (OFAC) sanctions lists or UK sanctions lists. Conduct regular sanctions screening and report any matches to the relevant authorities (UK Sanctions and Anti-Money Laundering Act 2018 – Section 54).

• Use of VPNs, TOR, or other tools to mask IP addresses. Implement risk-based procedures to identify and manage higher risk customers or transactions, including enhanced due diligence (JMLSG Guidance, Part 1 – Section 5.3.72).

• Transacting with entities operating in high-risk jurisdictions or customers from high-risk countries. Apply enhanced due diligence and risk mitigation measures for customers and transactions with high-risk jurisdictions, including obtaining additional information and conducting ongoing monitoring (JMLSG Guidance, Part 1 – Section 4.6).