“TRUST STARTS & ENDS WITH THE TRUTH”
“TRUST STARTS & ENDS WITH THE TRUTH”
Matt is both the company founder and a nationally renowned private investigator. Matt is an intelligence specialist who excels in detecting and preventing the illegal interception of communications and in providing high-tech covert surveillance. Matt has years of hands on experience in the investigation industry and has developed a reputation for incorporating state of the art technology and innovative ideas to provide effective solutions for his clients. Matt also serves as Treasurer for the Executive Board of Directors of FALI, The Florida Association of Licensed Investigators.
Enhanced due diligence is a deeper background review that banks, lenders, and investors run on higher-risk customers and counterparties. At Southern Recon Agency, we see enhanced due diligence from the deal side. A buyer, lender, or partner needs to know who stands behind a company and where the money came from, and the standard paperwork has stopped answering that.
Enhanced due diligence (EDD) applies to three groups: regulated financial institutions that must perform it, customers who are asked to go through it, and businesses that choose to run it on a counterparty.
In the United States, the duty comes from the Bank Secrecy Act and the rules of the Financial Crimes Enforcement Network (FinCEN). Coverage is wider than banks. The federal rule on private banking accounts also names brokers or dealers in securities, futures commission merchants, and mutual funds.
Customers make up the second group. A business owner opening an account for a company with foreign shareholders may be asked for ownership records and proof of where the opening deposit came from.
The third group has no legal duty at all. An investor, lender, or acquirer orders the same depth of review because the deal is large and the other side is unfamiliar. Voluntary reviews of that kind are where a licensed investigator does the work.
EDD in banking is the extra information a bank collects on a customer it rates as higher risk for money laundering or terrorist financing. Federal examiners treat that collection as part of an effective due diligence program. Each bank sets out, in written procedures, when the added review starts and what it gathers.
Customer due diligence (CDD) is the baseline every customer gets, and enhanced due diligence is the added layer a bank applies when the risk is higher.
The Federal Financial Institutions Examination Council (FFIEC) describes EDD as collecting additional information about customers that pose heightened risk, inside the same program. Every US bank has had to follow FinCEN’s CDD rule since May 11, 2018. Under that rule, a bank identifies anyone who owns 25 percent or more of a legal entity customer, at every risk level.
Hiring a contractor works the same way. Checking the license is standard due diligence. Pulling the permits from the last three jobs and calling those homeowners is the enhanced version.
| What people assume | What the rules say |
|---|---|
| Enhanced due diligence is a separate process from customer due diligence | EDD is the additional information collected on heightened-risk customers within the same due diligence program |
| Only banks perform it | The private banking rule also names broker-dealers, futures commission merchants, and mutual funds |
| Every politically exposed person triggers it | US regulators set no unique, additional steps for politically exposed persons, and the level follows the risk of the relationship |
| It happens once, at account opening | Higher-risk customers are reviewed more closely at opening and more often throughout the relationship |
| The bank decides every trigger on its own | Federal rules name specific cases, including certain foreign correspondent accounts |
Enhanced due diligence is one part of KYC. Know your customer (KYC) is the industry’s name for identifying a customer and understanding the relationship. Customer due diligence is the risk assessment inside KYC, and enhanced due diligence is the deeper review reserved for customers rated higher risk. A customer can clear the identity check and still be asked for more.
Enhanced due diligence is required when a federal rule names the situation or when the institution’s own risk rating puts a customer in the higher-risk group.
Two federal rules name it directly. The first covers correspondent accounts for certain foreign banks: a foreign bank with an offshore banking license, or with a license from a country designated as non-cooperative on money laundering or as warranting special measures. Where the foreign bank is not publicly traded, the US institution must identify each owner holding 10 percent or more.
The second is the private banking rule. When a senior foreign political figure owns a private banking account, the institution must apply enhanced scrutiny aimed at the proceeds of foreign corruption.
International standards add a geographic trigger. The Financial Action Task Force (FATF) calls for enhanced due diligence on business relationships and transactions tied to countries the FATF names as higher risk.
A bank’s risk rating triggers enhanced due diligence. Federal examiners list three categories a bank weighs: the products and services a customer uses, the type of customer or entity, and the geographic locations involved. A single factor does not settle the rating, and the bank looks at all customer information together.
In the United States, a politically exposed person does not automatically trigger enhanced due diligence. On August 21, 2020, FinCEN and four other federal agencies said the CDD rule creates no requirement for unique, additional due diligence steps for these customers. The review should match the risk of the specific relationship.
Enhanced due diligence checks where a customer’s money came from, who owns and controls the business, and whether the stated activity matches the records.
The FFIEC manual lists the kinds of information a bank may gather for a higher-risk customer:
Banks may also search for negative media coverage of the customer, at account opening and during the relationship.
Ownership records sometimes point to a person who cannot be found anywhere else, which is one of the patterns behind synthetic identity fraud.
Enhanced due diligence collects records that explain the customer’s money and business. Federal examiners list source of funds and wealth, occupation or business type, financial statements, the location of the business, and expected transaction volumes. The bank can ask for these at account opening and again later in the relationship.
Answer the request accurately, send the documents the bank names, and ask which records it will accept if one is hard to produce.
A request for more documents reflects how the bank rated the relationship. Owners abroad, international transfers, or high currency volume each give the bank more to understand.
Federal rules require institutions to keep procedures for the case where the review cannot be finished. Those procedures cover refusing to open the account, suspending transactions, filing a suspicious activity report, and closing the account. A customer who goes quiet leaves the bank with those options.
Recommended: Keep one file with your formation documents, an ownership chart, recent financial statements, and the paper trail for any large deposit, such as a sale contract or closing statement. Ask an attorney to review anything you are unsure how to answer.
Outside banking, enhanced due diligence is an investigation a buyer, lender, or investor orders on a person or company when the stakes are high and the public record is thin.
The checklist here comes from the decision at hand, since no regulation sets one. A merger, an acquisition, a joint venture, and a private loan each raise different questions about the people involved.
Our due diligence investigation work covers records that a basic online background report tends to skim:
Example (illustrative, not a client case): A Tampa buyer is two weeks from closing on a small logistics company, and the seller’s financials look clean. A records search shows the seller ran an earlier LLC that dissolved with unpaid judgments, under a slightly different spelling of his name. The buyer still has room to renegotiate the price, ask for an escrow holdback, or walk away.
A practicing attorney heads our corporate investigation work, and evidence is handled with litigation and compliance standards in mind. Southern Recon Agency is a Florida-licensed private investigation agency (License A1400197). Private investigation is licensed state by state, so confirm licensing for any firm you hire.
Hiring decisions call for a different product. Employment background screening follows its own federal and state rules and answers a narrower question about one candidate.
About to sign with a partner, buyer, or borrower whose history looks thin?
A due diligence investigation checks the court, licensing, and ownership records behind the name and puts the findings in writing.
See what a due diligence investigation covers
Enhanced due diligence has no fixed timeline, and the length depends on how complex the ownership is and how fast documents arrive.
A single owner with domestic records moves quickly. Layered entities, foreign registries, and missing paperwork each add time, at a bank and in a private deal alike. On the investigation side, our corporate cases run from days to weeks or longer, depending on scope.
Enhanced due diligence is repeated when something changes. Federal examiners describe updates to customer information as event-driven, and the rule sets no fixed schedule for refreshing it. Common events include a change in ownership, unexplained shifts in account activity, or a law enforcement inquiry. Banks may also set their own periodic reviews based on risk.
Enhanced due diligence is the deeper review applied to higher-risk customers and counterparties. US banks run it inside their customer due diligence programs, and federal rules require it for certain foreign correspondent and private banking accounts. A politically exposed person does not trigger it automatically. Outside banking, buyers, lenders, and investors order the same depth of review on the people behind a deal, where court records, ownership, and business history carry the weight.
Need to know who is behind a company and what the records show?
Southern Recon Agency documents ownership, court history, and business background in a report your attorney or lender can use.
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Florida-licensed private investigation agency, License A1400197.
Yes, in specific cases. Federal regulations require enhanced due diligence for correspondent accounts held by certain foreign banks, and enhanced scrutiny for private banking accounts owned by senior foreign political figures. Beyond those cases, banks must run risk-based due diligence and decide in their own procedures when a customer needs the deeper review.
Inside a bank, compliance staff perform enhanced due diligence under the institution’s anti-money laundering program. In a private deal, the party taking the risk orders it, often through an attorney, an accountant, or a licensed investigator. Each handles a different slice: legal terms, financial records, and the background of the people involved.
A licensed private investigator can perform the background side of enhanced due diligence for a deal, including court records, licenses, corporate ownership, and business history. An investigator does not replace a bank’s compliance program. Private investigation is licensed by each state, and Southern Recon Agency holds Florida license A1400197.
Federal rules tell institutions to plan for that outcome. A bank’s procedures must cover when it will refuse to open the account, suspend transactions, file a suspicious activity report, or close the account. In a private deal, an unanswered question usually becomes a negotiating point or a reason to pause.
Cost depends on scope. A review of one individual in one state takes less work than a company with several owners and entities across borders. Southern Recon Agency quotes due diligence investigations after an initial assessment of what needs to be checked, so the fee reflects the records involved.
Matt Aubin is the founder and managing partner of Southern Recon Agency, which he started in 2010. He is a court-qualified expert witness in cyber intelligence and cyber forensics, a Certified TSCM Technician, a Certified Digital Forensics Examiner, and a Florida Board Certified Investigator. He is a member of the U.S. Secret Service Miami Electronic Crimes Task Force and FBI InfraGard Tampa.
The information in this article is general, applies to US readers, and is not legal or financial advice. For help with a specific situation, talk to a licensed attorney or compliance professional in your state.