Exalted due diligence

Looking at my trusty OED (and yes, I still use a paper one), “to enhance” is “to increase the quality, value or extent of”.  Possible synonyms (I assume the FATF looked at these at some point) include to amplify, to augment, to boost, to elevate, to increase, to intensify and to strengthen.  “To exalt” (another synonym) may be a bit spiritual for our tastes, but “exalted due diligence”…. I quite like it, and we wouldn’t have to change all our references to EDD.

Anyhoo, I have been thinking about the core meaning of enhanced due diligence because of several requests from clients to include in training “exactly what is meant by EDD, what extra we need to do”.  In its recent update to its Forty Recs – specifically the Interpretive Note to Rec 10 (on CDD) – the FATF does suggest some possible components of EDD.  And regulators in most jurisdictions likewise give a steer on this in their guidance to industry, although – unlike basic verification of identity – it is often left to the individual firm whether (and how) to get documentary evidence of what they are told, if indeed such evidence exists.  Firms know that they have to differentiate: if they do a certain level of due diligence on standard clients, they must do more on higher risk ones.  But some firms do so much on even standard clients – particularly firms in high-risk sectors or with high-risk client bases – that they struggle to know what more to do to boost it to EDD.  My usual suggestions are these:

  • additional (possibly independent) corroboration of known information [thus increasing the quality of the original due diligence – remember that we want to increase quality, value and extent]
  • evidence of source of funds and (tricky, this one) source of wealth [extent]
  • more frequent and more probing monitoring [extent]
  • senior management sign-off on (and review of) the relationship [hmmm….].

I’m missing “value”, so perhaps the core of EDD is to take nothing on face value, but to check, double-check and regularly re-check everything.  Any thoughts?

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