When it comes to Enhanced Due Diligence (EDD), timing is everything. You don’t want to overburden your compliance team with unnecessary deep dives, but you also can’t afford to miss red flags. That’s where EDD alerts come in—they’re the signals that tell you, “Hey, it’s time to take a closer look.”
But what exactly triggers an EDD alert? Let’s break down the most common scenarios that should prompt a deeper investigation.
1. High-Risk KYB Results
One of the most common sources of EDD alerts is the initial Know Your Business (KYB) screening. If a company comes back flagged as high risk—due to its jurisdiction, industry, ownership structure, or regulatory history—it’s a strong signal that standard due diligence won’t cut it.
A high-risk KYB result may indicate:
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Connections to high-risk countries or sanctions lists
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Shell company characteristics (e.g., no physical address, obscure ownership)
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Exposure to politically exposed persons (PEPs)
In these cases, an EDD review can help clarify the true nature of the business and determine whether the risk is manageable or a dealbreaker.
2. Transaction Monitoring Alerts
Another key source of EDD alerts is transaction monitoring. If your systems pick up unusual patterns—large, round-number transfers, rapid movement of funds between accounts, or unexpected international wires—that’s your cue to look deeper.
What makes these alerts particularly valuable is their real-time nature. Unlike onboarding reviews, transaction alerts can flag changes in behavior long after a client relationship has begun.
Common transaction-related triggers include:
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Structuring or smurfing to avoid reporting thresholds
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Sudden activity inconsistent with customer profile
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Use of high-risk payment methods or destinations
When an alert pops up, the goal of the EDD review is to verify whether the activity is legitimate—or a sign of something more sinister.
3. Periodic Refreshes Uncovering New Risk
Even well-behaved clients can change over time. That’s why periodic refreshes of customer data are vital—and why they can also spark EDD alerts.
During a refresh, new information may surface:
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A change in ownership structure
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A shift in business model
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A newly sanctioned affiliate
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A downgrade in financial standing
These changes might not have triggered alerts when the account was first opened, but they can significantly alter the risk profile today. That’s when an updated EDD review becomes necessary.
4. Regulatory or Internal Policy Triggers
Some EDD alerts are triggered by thresholds set internally or by regulation. For instance, if a customer hits a certain transaction volume or opens a new type of account, your policies might automatically require an EDD review.
Think of these as “compliance circuit breakers”—even if nothing looks suspicious at first glance, they’re designed to prompt periodic reevaluation of higher-risk relationships.
Wrapping Up
So, what is an EDD alert? It’s a signal—sometimes subtle, sometimes blaring—that something about a customer or transaction deserves closer scrutiny. Whether it’s a red flag from KYB, a suspicious transaction, or a newly surfaced risk in a periodic refresh, EDD alerts help you stay proactive, not reactive.
In a world of growing complexity and regulatory expectations, recognizing these triggers is essential to keeping your compliance program both effective and agile.
