Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) are both crucial processes used by businesses, particularly in the financial sector, to assess and manage risks associated with their customers. However, they differ in their depth and scope of scrutiny: Customer Due Diligence (CDD): Purpose: CDD is a standard process used to verify the identity of customers and assess their risk level. It involves collecting basic information about the customer to ensure compliance with regulatory requirements. Scope: CDD involves verifying the customer’s identity, understanding their source of funds, and assessing the level of risk associated with the business relationship. Application: CDD is applied to all customers during the onboarding process to establish a basic level of understanding and compliance. Enhanced Due Diligence (EDD): Purpose: EDD is a more comprehensive and detailed process applied to higher-risk customers or transactions. Its primary goal is to gather additional information and conduct a deeper analysis to better understand and mitigate potential risks. Scope: EDD goes beyond CDD by involving a more in-depth examination of the customer’s background, financial activities, and business relationships. It may include gathering information on beneficial ownership, source of wealth, and additional documentation. Application: EDD is triggered by factors indicating higher risk, such as dealing with politically exposed persons (PEPs), conducting transactions in high-risk jurisdictions, or engaging in complex and unusual transactions. While both CDD and EDD aim to assess and manage risks associated with customers, EDD is a more intensive process applied to customers or transactions deemed to have a higher level of risk. It involves gathering additional information and conducting a more thorough analysis to ensure compliance with regulatory standards and to mitigate potential financial crimes.