How do I conduct enhanced due diligence on a high-risk client?

Enhanced due diligence applies when a client or transaction presents a higher-than-normal ML/TF risk. It is not a checklist — it is a more intensive investigation that goes beyond verifying who the client is, to understanding where their money comes from and why they are engaging your firm.

What triggers EDD?

• Politically Exposed Persons (PEPs): A client who is or has been a senior government official, executive of a state-owned enterprise, or an immediate family member or close associate of such a person
• High-risk jurisdictions: Clients based in, or with funds originating from, countries on the FATF grey or black lists, or AUSTRAC-identified high-risk jurisdictions
• Complex ownership structures: Companies with multiple layers of ownership, trusts with discretionary beneficiaries, or structures where beneficial ownership is difficult to establish
• Unusual transaction patterns: Activity inconsistent with what you know about the client's business or financial profile
• Adverse media: Negative news or regulatory action involving the client

What EDD requires you to collect

• Source of funds: Where is the specific money in this transaction coming from? Collect documentary evidence (bank statements, sale contracts, loan agreements)
• Source of wealth: How did the client accumulate their overall wealth? This is broader than source of funds — it requires understanding their business history, inheritance, salary, or other wealth-generating activities
• Purpose of the relationship: Why is this client engaging your firm for this service?
• Additional identity verification: A second form of identity evidence, or verification from a second independent source

Senior management approval

For high-risk clients, your AML/CTF program should require sign-off from a senior manager or compliance officer before the relationship begins. This approval must be documented. It signals that someone senior in the firm has reviewed the risk and made a deliberate decision to proceed.

Ongoing monitoring for EDD clients

EDD clients must be monitored more frequently than standard-risk clients. This means reviewing their file at shorter intervals, re-screening against PEP and sanctions lists more often, and scrutinising transactions more closely. Any material change in their circumstances may trigger a fresh EDD review.