Which type of customers require Enhanced Due Diligence (EDD)?

Enhanced Due Diligence (EDD) is particularly necessary for politically exposed persons (PEPs) and their associates due to the elevated risks associated with their potential involvement in corruption, money laundering, or other financial crimes. PEPs are individuals who hold prominent public positions or have a close association with such individuals, making them more susceptible to misconduct and abuse of power.

When institutions engage with PEPs, they must conduct more thorough background checks, monitor transactions closely, and assess the sources of their wealth to ensure compliance with anti-money laundering (AML) regulations. The heightened scrutiny reflects the responsibility to mitigate risks that come with engaging in transactions involving these individuals.

Regular customers without concerns, first-time buyers, or only high-net-worth individuals do not automatically require the same level of scrutiny as PEPs, as these groups may not present the same risks associated with financial crimes. Therefore, the focus on PEPs for EDD aligns with best practices in risk management and compliance within the context of art law and transactions.