Enhanced Due Diligence isn’t complicated. The manual process is.
Fifteen documents across email, portals, WhatsApp, and post. Five PEP databases to screen. Three hours per high-risk client while your pipeline backs up. The Solicitors Regulation Authority found that 83% of enforcement actions involve insufficient customer due diligence. Not fraud, just inadequate systems.
When you handle Politically Exposed Persons, high-risk jurisdictions, or complex ownership structures, standard CDD doesn’t meet MLR 2017 requirements. You need deeper verification, stronger documentation, and complete audit trails.
FigsFlow reduces verification time from three hours to fifteen minutes per client. Every PEP check, sanctions screening, and risk assessment runs automatically with full MLR 2017 compliance built in.
Let’s break down exactly what Enhanced Due Diligence requires, when it applies, and how to implement it without drowning in paperwork.
KEY TAKEAWAYS
- Manual EDD takes 3 hours per high-risk client with documents scattered across multiple channels and inconsistent screening
- Enhanced Due Diligence is required for Politically Exposed Persons, high-risk countries, and complex ownership structures under MLR 2017
- 83% of enforcement actions involve insufficient customer due diligence due to inadequate systems
- FigsFlow automates the entire EDD workflow in 15 minutes with secure document collection, instant PEP/sanctions screening, and complete audit trails
Enhanced Due Diligence Simplified
Enhanced Due Diligence represents the highest tier of Know Your Customer checks under the Money Laundering Regulations 2017. Think of it as an investigative mode for client onboarding.
Standard Customer Due Diligence asks three questions:
- Who is this client?
- Can we verify their identity?
- What’s the purpose of this business relationship?
Enhanced Due Diligence adds seven more:
- Where does their money come from?
- Who ultimately owns and controls this entity? Do they appear on sanctions lists?
- Are they Politically Exposed Persons?
- What does public media say about them?
- Does their transaction pattern make economic sense?
- How often should we re-verify all of this?
The difference matters because money laundering costs the UK economy £290 billion annually, according to the National Crime Agency. Professional services firms, including accountancy practices, represent attractive targets for criminals seeking to legitimise illicit funds through seemingly normal business relationships.
Enhanced Due Diligence serves three purposes: fulfilling legal obligations under MLR 2017 Regulation 33, protecting your firm from reputational damage and regulatory sanctions, and demonstrating to HMRC and professional bodies that you take anti-money laundering seriously.
When Is Enhanced Due Diligence Required?
MLR 2017 defines specific circumstances requiring Enhanced Due Diligence.
Here's the Key Principle to Apply Enhanced Due Diligence:
Enhanced Due Diligence applies whenever risk factors indicate a higher probability of money laundering or terrorist financing.
Enhanced Due Diligence vs Customer Due Diligence vs Simplified Due Diligence
Money Laundering Regulations establish a risk-based approach with three tiers.
Simplified Due Diligence suits genuinely low-risk situations: public authorities, companies listed on regulated stock exchanges, and banks already subject to equivalent AML supervision. You modify verification measures proportionate to risk. Perhaps verify one director instead of all three. Accept fewer documents for beneficial owner identification.
Customer Due Diligence represents your baseline for normal-risk relationships. You identify the client through official documents, verify their identity using independent, reliable sources, understand the intended nature of the business relationship, and implement ongoing monitoring.
Enhanced Due Diligence escalates every element of standard checks. You still perform all Customer Due Diligence measures, then add multiple layers:
- Identity verification from wider independent sources
- Deeper background investigation into the corporate structure and financial situation
- Source of wealth examination spanning years
- Intensified transaction scrutiny
- Continuous monitoring instead of periodic reviews
Need the Full Breakdown?
Our comprehensive guide covers when to apply each due diligence tier, what MLR 2017 requires for each level, and how to determine client risk ratings that trigger EDD requirements.
The Enhanced Due Diligence Process: Step-by-Step
Conducting Enhanced Due Diligence follows a systematic approach.
Common Enhanced Due Diligence Challenges
Manual EDD fails at five critical points where human processes break down under volume and complexity.
EDD simplifies and removes these failure points through automation that ensures consistency and completeness by default.
How FigsFlow Simplifies Enhanced Due Diligence
FigsFlow centralises Enhanced Due Diligence management, eliminating the document chaos and screening hassles that consume hours of compliance time.
The Result: Enhanced Due Diligence becomes organised workflow management instead of scattered manual chaos. Documents centralised. Screening automated. Risk assessments are structured. Audit trails maintained. Everything needed for MLR 2017 compliance in one platform, reducing hours of administrative burden to streamlined process execution.
EDD Is Just the Beginning
Enhanced Due Diligence Red Flags to Watch
Recognising warning signs during Enhanced Due Diligence helps you identify when clients present elevated money laundering risk. These red flags signal the need for deeper investigation or, in some cases, declining the engagement altogether.
Trust your professional judgment. If something feels wrong during Enhanced Due Diligence, pause and investigate further before proceeding.
Additional Resources
- HMRC Economic Crime Supervision Guidance: Economic Crime Supervision Handbook – HMRC internal manual – GOV.UK
- FCA Handbook on Customer Due Diligence: FCA Handbook
- FATF High-Risk Countries List: “Black and grey” lists
- Learn Everything about AML Verification for UK AML Compliance: UK AML Verification Guide 2026: MLR Amendments & Sanction Updates
- Discover the Best Way to Perform Enhanced Due Diligence on Politically Exposed Persons (PEPs): How to Perform Enhanced Due Diligence on PEPs | FigsFlow
- These 7 Client Onboarding Mistakes Are Quietly Hurting Your Business Growth: 5 Client Onboarding Mistakes Costing You Clients
Conclusion
Enhanced Due Diligence protects UK accountancy practices from money laundering risk, regulatory enforcement, and reputational damage. When you handle Politically Exposed Persons, high-risk third countries, or complex beneficial ownership, standard Customer Due Diligence isn’t enough.
Manual Enhanced Due Diligence consumes three hours per high-risk client through scattered document collection, multiple screening platforms, and inconsistent risk assessments.
FigsFlow centralises the entire workflow: secure KYC portal, Trust ID verification, one-click PEP and sanctions screening, pre-built risk assessment templates, and Customer Risk Rating with complete audit trails.
Streamlined Enhanced Due Diligence that protects your firm while eliminating compliance chaos.
Frequently Asked Questions (FAQs)
Simplified Due Diligence is a streamlined verification process for genuinely low-risk clients under MLR 2017. You apply reduced checks for public authorities, regulated stock exchange companies, or financial institutions already subject to equivalent AML supervision. This might mean verifying one director instead of three or accepting fewer beneficial ownership documents.
Simplified Due Diligence uses reduced checks for low-risk clients. Customer Due Diligence is your standard baseline for normal-risk relationships. Enhanced Due Diligence escalates every check for high-risk clients by adding source of wealth examination, continuous monitoring, and intensified transaction scrutiny beyond standard CDD measures.
Enhanced Due Diligence is the highest tier of Know Your Customer checks under MLR 2017. It requires deeper investigation when clients present elevated money laundering risk through PEP status, high-risk jurisdictions, or complex ownership structures. EDD adds source of wealth examination, comprehensive screening, and continuous monitoring beyond standard Customer Due Diligence.
Enhanced Due Diligence is required for Politically Exposed Persons and their family members or close associates. It applies to business relationships involving Financial Action Task Force high-risk countries, complex beneficial ownership structures, or unusual transactions without a clear economic purpose. Any situation where risk factors indicate a higher money laundering probability triggers EDD requirements.
A UK accounting practice onboarding a local council might apply Simplified Due Diligence since public authorities present a low money laundering risk. You could verify identity through fewer documents and accept reduced beneficial ownership checks. The measures must remain proportionate to the genuinely low risk presented under MLR 2017.
No. Enhanced Due Diligence applies only to high-risk situations identified through your risk assessment. You must apply EDD for foreign Politically Exposed Persons, clients from high-risk third countries, and situations where your controls identify an elevated money laundering probability. Standard Customer Due Diligence remains appropriate for normal-risk relationships.
