Enhanced Due Diligence, PEP Screening, and Adverse Media in Practice
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Key Insights
- Enhanced Due Diligence (EDD) applies additional scrutiny to high-risk customers beyond standard KYC/CDD.
- This module covers EDD triggers (PEP status, high-risk jurisdictions, complex ownership structures, adverse media), Politically Exposed Person identification and risk assessment, adverse media screening methodologies (NLP, sentiment analysis, source credibility scoring), and 2025-2026 trends including continuous EDD monitoring, AI-driven adverse media analysis, and the convergence of PEP databases with beneficial ownership registers across jurisdictions.
Overview
Enhanced Due Diligence (EDD) is a higher level of customer scrutiny applied to high-risk relationships, most notably Politically Exposed Persons (PEPs). PEPs are individuals who hold or have held prominent public positions, and their family members and close associates. Their access to public funds and influence makes them higher risk for corruption and bribery.
EDD measures go significantly beyond standard CDD. They require identifying the source of wealth and source of funds in detail, understanding the customer's business and reputation, establishing the rationale for the business relationship, and conducting more frequent reviews. EDD programs must be risk-sensitive, with the depth of investigation proportional to the assessed risk.
Key Concepts
- PEP: Politically Exposed Person — an individual with a prominent public position, their family members, and close associates.
- Source of Wealth: The total accumulation of a customer's wealth, including inheritance, business profits, investments, and other sources.
- Source of Funds: The specific origin of money being used for a particular transaction or business relationship.
- Domestic vs Foreign PEP: Foreign PEPs generally require higher scrutiny than domestic PEPs due to jurisdictional oversight differences.
- Adverse Media Screening: Checking customers against news sources for negative information related to corruption, financial crime, or sanctions.
Key Takeaways
- EDD applies enhanced scrutiny to high-risk customers including PEPs and their associates.
- Source of wealth and source of funds analysis are critical EDD components.
- Foreign PEPs typically require higher levels of due diligence than domestic PEPs.
- EDD programs must be risk-sensitive, with investigation depth proportional to assessed risk.
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Feynman Concept Cards
Master each building block: read the ELI5, explore the analogy, work the example, find your gaps, teach it back, build it.
Enhanced Due Diligence is a concept in cdd kyc. In simple terms, Enhanced Due Diligence covers customer due diligence within Compliance. This compliance concept addresses key topics in the customer due diligence within compliance domain. Also known as: EDD. Related
Analogy
Example
Find Gaps
Explain Enhanced Due Diligence as if teaching a colleague who is new to cdd kyc. Cover: what it is, how it works, and why it matters.
Create
Create a checklist that demonstrates Enhanced Due Diligence in a real-world cdd kyc scenario. Walk through your design decisions.
Show solution
A checklist for Enhanced Due Diligence should include: 1. The core components of edd 2. How they interact 3. Expected outcomes or outputs
Know Your Customer (KYC) is a concept in cdd kyc. In simple terms, Know Your Customer (KYC) covers customer due diligence within Compliance. This compliance concept addresses key topics in the customer due diligence within compliance domain. Also known as: KYC, know-
Analogy
Example
Find Gaps
Explain Know Your Customer (KYC) as if teaching a colleague who is new to cdd kyc. Cover: what it is, how it works, and why it matters.
Create
Create a checklist that demonstrates Know Your Customer (KYC) in a real-world cdd kyc scenario. Walk through your design decisions.
Show solution
A checklist for Know Your Customer (KYC) should include: 1. The core components of kyc 2. How they interact 3. Expected outcomes or outputs
Customer Due Diligence is a concept in cdd kyc. In simple terms, Customer Due Diligence covers customer due diligence within Compliance. This compliance concept addresses key topics in the customer due diligence within compliance domain. Also known as: CDD. Related
Analogy
Example
Find Gaps
Explain Customer Due Diligence as if teaching a colleague who is new to cdd kyc. Cover: what it is, how it works, and why it matters.
Create
Create a checklist that demonstrates Customer Due Diligence in a real-world cdd kyc scenario. Walk through your design decisions.
Show solution
A checklist for Customer Due Diligence should include: 1. The core components of cdd 2. How they interact 3. Expected outcomes or outputs
Politically Exposed Person is a concept in risk assessment. In simple terms, Politically Exposed Person covers risk assessment for Compliance. This compliance concept addresses key topics in the risk assessment for compliance domain. Also known as: PEP, politically-exposed-per
Analogy
Example
Find Gaps
Explain Politically Exposed Person as if teaching a colleague who is new to risk assessment. Cover: what it is, how it works, and why it matters.
Create
Create a matrix that demonstrates Politically Exposed Person in a real-world risk assessment scenario. Walk through your design decisions.
Show solution
A matrix for Politically Exposed Person should include: 1. The core components of pep 2. How they interact 3. Expected outcomes or outputs
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