What does "enhanced due diligence" involve?

Enhanced due diligence refers to the processes and measures a financial institution employs to gain a deeper understanding of its high-risk customers or transactions. This typically involves additional scrutiny beyond standard due diligence measures, which are applied to all customers.

When dealing with high-risk customers or activities, which may include clients in high-risk industries or regions, institutions implement stricter monitoring and review processes to identify and mitigate potential money laundering, terrorist financing, or other illicit activities. This heightened level of scrutiny might encompass examining transaction patterns, verifying sources of funds more rigorously, and frequent review of customer information.

The correct option focuses specifically on these heightened practices, which are necessitated by the increased risk associated with certain customers or transactions. This approach aims to ensure compliance with the Bank Secrecy Act and related regulations, protecting the institution from being exploited for illegal activities, while supporting overall market integrity.