# Enhanced Due Diligence Memo: [Customer name]

> Enhanced due diligence (EDD) memo for one customer relationship or
> occasional transaction that presents higher money laundering or
> terrorist financing risk: the trigger (politically exposed person,
> high-risk third country, complex or unusual structure or transaction,
> or another higher-risk factor), the analysis, source of wealth and
> source of funds corroboration, adverse media, mitigation measures,
> senior management approval, the enhanced monitoring plan and the
> decision. Based on FATF Recommendations 10, 12 and 19 (cited by number
> and title), the current EU framework (Directive (EU) 2015/849 as
> transposed in national law), the EU Anti-Money Laundering Regulation,
> Regulation (EU) 2024/1624 (AMLR), which applies from 2027-07-10, the UK
> Money Laundering Regulations 2017 and US rules for private banking and
> correspondent accounts (31 CFR 1010.610 and 1010.620), as of 2026-10.
> Replace every `[bracketed]` value and every row marked *Example*. This
> is a document format, not legal, compliance or regulatory advice.
> Obtain the standard or law for the normative text and check current
> local law.

<!--
Guidance: How to use this template
- Purpose: a decision record that explains why a relationship is higher
  risk, what extra work was done, what was found, how the remaining risk
  is controlled and who accepted it. The approver must be able to make
  a decision from this memo alone.
- Open an EDD memo when the KYC profile (`compliance/kyc-cdd-profile`)
  or the customer risk rating methodology
  (`compliance/customer-risk-rating-methodology`) produces a high rating
  or an automatic EDD trigger. Correspondent banking relationships use
  their own file (`compliance/correspondent-banking-due-diligence`).
- Fill sections 1 to 3 first (trigger, summary, risk analysis), then
  gather evidence for sections 4 to 6 before you write the conclusion.
  Write the conclusion last.
- The worked example is fictional: Fernhollow Bank (a fictional
  mid-sized EU credit institution) onboarding Quillmere Marine Supplies
  B.V., whose beneficial owner Tomas Ekhart is a fictional domestic PEP.
  All people and companies are invented.
- Common pitfall: listing documents received without saying whether
  they corroborate the customer's account of their wealth. EDD is about
  plausibility and evidence, not volume of paper.
-->

## Document control

<!-- Guidance: EDD memos are approved at a higher level than standard files. Record the approver's role, because the law requires senior management approval for PEPs and for several other high-risk cases. -->

| Field | Value |
|---|---|
| Document ID | [EDD-YYYY-NNNN] (*Example:* EDD-2026-0311) |
| Linked KYC profile | [KYC-YYYY-NNNNN] (*Example:* KYC-2026-01482) |
| Customer | [Name] (*Example:* Quillmere Marine Supplies B.V.) |
| Subject(s) of EDD | [Customer / beneficial owner / transaction] (*Example:* BO-002 Tomas Ekhart, domestic PEP) |
| EDD trigger code(s) | [See section 1] (*Example:* TRG-PEP, TRG-STRUCT) |
| Booking entity | [Legal entity and branch] (*Example:* Fernhollow Bank, head office) |
| Version | [1.0] |
| Status | [Draft / Pending approval / Approved / Declined / Superseded] |
| Owner | [@edd-analyst] |
| Approvers/reviewers | [@mlro or delegate], [@senior-management-approver] |
| Last updated | YYYY-MM-DD |
| Next EDD review | YYYY-MM-DD (at least annual while EDD applies) |
| Classification | Confidential: financial crime compliance, need-to-know |

### Approvals

| Role | Name | Decision | Date |
|---|---|---|---|
| EDD analyst (preparer) | [@name] | [Complete] | YYYY-MM-DD |
| Financial crime compliance reviewer | [@name] | [Supports / Does not support] | YYYY-MM-DD |
| MLRO or delegate | [@name] | [Supports / Does not support] | YYYY-MM-DD |
| Senior management approver | [@name] | [Approve / Approve with conditions / Decline] | YYYY-MM-DD |

### Revision history

| Version | Date | Author | Change summary |
|---|---|---|---|
| 1.0 | YYYY-MM-DD | [@name] | Onboarding EDD |
| 1.1 | YYYY-MM-DD | [@name] | *Example:* Added notarised sale agreement for source of wealth item SOW-001 |
| 2.0 | YYYY-MM-DD | [@name] | *Example:* Annual EDD refresh |

## Contents

1. [EDD trigger and legal basis](#1-edd-trigger-and-legal-basis)
2. [Customer and relationship summary](#2-customer-and-relationship-summary)
3. [Higher-risk factor analysis](#3-higher-risk-factor-analysis)
4. [Source of wealth](#4-source-of-wealth)
5. [Source of funds](#5-source-of-funds)
6. [Adverse media and open-source findings](#6-adverse-media-and-open-source-findings)
7. [Risk conclusion](#7-risk-conclusion)
8. [Mitigation measures and conditions](#8-mitigation-measures-and-conditions)
9. [Senior management approval](#9-senior-management-approval)
10. [Enhanced monitoring plan](#10-enhanced-monitoring-plan)
11. [Decision and rationale](#11-decision-and-rationale)
12. [Glossary and references](#12-glossary-and-references)
13. [Standard and licence note](#standard-and-licence-note)

## 1. EDD trigger and legal basis

<!-- Guidance: Name every trigger, because each brings its own mandatory measures. A PEP requires senior management approval, source of wealth and funds and enhanced monitoring; a high-risk third country brings the measures the law lists for those countries; a complex or unusual transaction requires examination of its background and purpose. Pitfall: recording one trigger when two apply, so a mandatory measure is missed. -->

Record every reason EDD applies. Laws require EDD in defined cases and
in any other case the institution's own risk assessment identifies as
higher risk. The list below covers the cases most institutions meet.
Tick each that applies and record the specific mandatory measures in
section 8.

| Code | Trigger | Applies? | Legal basis (as of 2026-10, check local law) |
|---|---|---|---|
| TRG-PEP | Customer, beneficial owner or representative is a PEP (domestic, foreign or international organisation), family member or known close associate (maps to TRG-01 in the Customer Risk Rating Methodology) | [Yes / No] (*Example:* Yes) | FATF R.12; Dir. (EU) 2015/849 Arts 20 to 23 via national law; AMLR Arts 42 to 46 from 2027-07-10; UK MLR reg. 35; US 31 CFR 1010.620 for private banking accounts of senior foreign political figures |
| TRG-HRTC | Business relationship or transaction involving a high-risk third country | [Yes / No] (*Example:* No) | FATF R.19; Dir. (EU) 2015/849 Art. 18a via national law and the Commission's delegated regulation listing high-risk third countries; AMLR Arts 29 to 31 and 35 from 2027-07-10; UK MLR reg. 33 |
| TRG-STRUCT | Complex or opaque ownership (several layers, trusts, nominees, holding companies in other countries) | [Yes / No] (*Example:* Yes, trust layer and foreign holding) | Risk factors in national law and EBA ML/TF risk factor guidelines (EBA/GL/2021/02); AMLR Art. 34(3) and Annex III from 2027-07-10 |
| TRG-TXN | Transaction that is complex, unusually large, in an unusual pattern or without apparent economic or lawful purpose | [Yes / No] | Dir. (EU) 2015/849 Art. 18(2) via national law; AMLR Art. 34(2) from 2027-07-10; UK MLR reg. 33(1) |
| TRG-HNW | Personalised services handling at least EUR 5,000,000 of assets for a customer with total assets of at least EUR 50,000,000 (excluding private residence) | [Yes / No] | AMLR Art. 34(5) from 2027-07-10 |
| TRG-RBI | Applicant for a residence by investment scheme | [Yes / No] | AMLR Art. 41 from 2027-07-10 |
| TRG-RISK | Other higher risk identified by the risk rating or business-wide risk assessment | [Yes / No] | Institution's methodology; FATF R.10 |

## 2. Customer and relationship summary

<!-- Guidance: A short summary so the approver does not need to open the KYC file. Include the products, expected volumes and the ownership chart. Pitfall: pasting the whole KYC profile; summarise and link instead. -->

Summarise the customer, the relationship requested and the people
involved. Link to the KYC profile for the detail.

| Item | Value |
|---|---|
| Customer and activity | [Summary] (*Example:* Wholesale distributor of marine safety equipment, NL, filed 2025 revenue EUR 18.4 million) |
| Products | [Products] (*Example:* EUR and USD current accounts, international payments, documentary collections, card acquiring) |
| Expected monthly inflows | [Amount] (*Example:* EUR 1,540,000) |
| Expected monthly outflows | [Amount] (*Example:* EUR 1,310,000) |
| Ownership | [Summary] (*Example:* 60% Strand Holding Ltd (Malta), owned 50/50 by Mirela Strand and Tomas Ekhart; 30% Halden Voss; 10% Corran Family Trust) |
| Relationship manager | [@name] |
| Calculated and final risk rating | [Ratings] (*Example:* calculated Medium 2.08, final High due to PEP trigger TRG-01 of the methodology) |

```mermaid
flowchart LR
  T["Trigger from KYC profile or rating"] --> A["EDD analysis (sections 3 to 6)"]
  A --> C{"Risk explained and mitigable?"}
  C -->|Yes| M["Mitigation and conditions (section 8)"]
  M --> S["Senior management approval (section 9)"]
  S --> E["Enhanced monitoring (section 10)"]
  C -->|No| D["Decline or exit; consider FIU report"]
  E --> R["Annual EDD refresh or trigger review"]
  R --> A
```

## 3. Higher-risk factor analysis

<!-- Guidance: Analyse each trigger separately. For a PEP, describe the function, the jurisdiction, the level of influence over public money or contracts, and any link between the function and the customer's business. For a country, state why it is listed and which flows touch it. For a structure, explain why each layer exists. Pitfall: treating all PEPs as equal; risk differs with function, country and length of office. -->

### 3.1 Politically exposed person

Describe the prominent public function and whether it gives the person
influence that could be abused for corruption or misuse of public
funds. Member States publish lists of the functions they treat as
prominent public functions (AMLR Art. 43 requires such lists). Consider
whether the customer's business deals with the public body the PEP
serves, whether the PEP's family or close associates are involved, and
how long ago the function started or ended. Under the AMLR (Art. 45),
the institution keeps applying risk-based measures for at least 12
months after a person stops holding the function and until it judges
that no further PEP-specific risk remains.

EDD applies to domestic and foreign PEPs alike: neither EU law
(national law transposing AMLD4 now, the AMLR from 2027-07-10) nor UK
law lets the institution skip enhanced measures because a PEP is
domestic. The category still changes the extent of the measures. In the
UK, MLR 2017 reg. 35(3A), inserted by SI 2023/1371 from 2024-01-10,
makes a lower level of risk the starting point for domestic PEPs and
their family members and known close associates, so the EDD applied is
normally less than for a non-domestic PEP unless other enhanced risk
factors are present. Record the category and, where the measures are
lighter, the reasoning.

| Item | Value |
|---|---|
| PEP subject | [Name, ID] (*Example:* BO-002 Tomas Ekhart, 30% indirect owner) |
| Function and body | [Function] (*Example:* Member of the national parliament, Netherlands, since 2023-12) |
| Category | [Domestic / Foreign / International organisation / Family member / Close associate] (*Example:* Domestic PEP) |
| Influence over procurement, licensing or public funds relevant to the customer | [Assessment] (*Example:* Sits on the parliamentary infrastructure committee; ferry and port concessions are awarded by a national ministry. Customer has no public sector customers; confirmed by top-20 customer list) |
| Family members or close associates in the relationship | [Names or "none identified"] |
| Expected end of function | YYYY-MM-DD (*Example:* term ends 2028-03) |

### 3.2 High-risk third country

For each country link, record whether it is on the European
Commission's list of high-risk third countries (or your national list),
on an FATF public statement, or subject to sanctions, and which flows
touch it. For EU institutions the current list is set by Commission
delegated regulation under Directive (EU) 2015/849; from 2027-07-10 the
AMLR (Arts 29 to 31) gives the Commission power to identify countries
and to specify which enhanced measures and countermeasures apply to
each. Check the current list on the date of the memo.

| Country | Link to relationship | EU list status (date checked) | FATF status (date checked) | Measures applied |
|---|---|---|---|---|
| Malta *(Example)* | Holding company domicile | Not listed (YYYY-MM-DD) | Not listed (YYYY-MM-DD) | Standard |
| Türkiye *(Example)* | Supplier payments | Not listed (YYYY-MM-DD) | Check current FATF statement | Supplier screening, payment purpose review |

### 3.3 Complex structure or unusual transactions

Explain every layer of the ownership structure and the business reason
for it. A holding company may be used for estate planning, investor
protection or tax reasons that are lawful; the question is whether the
reason is documented, whether it obscures who controls the customer and
whether any layer sits in a country with weak transparency rules. For
an unusual transaction, record its background and purpose, the
counterparties and why the amount or pattern differs from the profile.

| Layer or transaction | Purpose stated | Evidence | Assessment |
|---|---|---|---|
| Strand Holding Ltd, Malta *(Example)* | Joint holding vehicle for two co-founders since 2018 | Shareholders' agreement 2018-05-02; Maltese register extract | Plausible; both owners identified and verified |
| Corran Family Trust, 10% *(Example)* | Estate planning for a former co-founder's family | Trust deed extract, trustee confirmation letter | Below threshold; settlor, trustee, beneficiaries identified; no link to PEP |

### 3.4 Other higher-risk factors

List any other factor from the risk rating (product, channel,
industry, cash intensity, new technology) and state whether it changes
the measures needed. *Example:* Trade finance with suppliers outside
the EU raises trade-based money laundering risk; the bank applies
document review on each collection and price plausibility checks on a
sample of invoices.

## 4. Source of wealth

<!-- Guidance: Source of wealth is how the person built their total wealth. Estimate total net worth, break it into components, and corroborate the material ones with independent evidence. Proportionality: corroborate more where the PEP function is more senior or the amounts are larger. Pitfall: accepting a customer statement without any independent support for the largest component. -->

Establish how each PEP or high-risk subject accumulated their wealth.
For a PEP the law requires adequate measures to establish both source
of wealth and source of funds (FATF R.12; Dir. (EU) 2015/849 Art. 20
via national law; AMLR Art. 42(1)(b) from 2027-07-10). Start from the
subject's own declaration, break it into components, and corroborate
each material component with documents from independent or public
sources. Explain any gap.

| ID | Component | Declared amount (EUR) | Evidence | Independent? | Corroborated? |
|---|---|---|---|---|---|
| SOW-001 *(Example)* | Proceeds from sale of shares in a former software company, 2019 | 1,400,000 | Notarised share sale agreement; bank statement showing receipt | Yes | Yes |
| SOW-002 *(Example)* | 50% interest in Strand Holding Ltd (estimated value) | 1,100,000 | Holding accounts 2025; 60% stake valued at 1.2x Quillmere book equity (EUR 3.06 million x 1.2 x 60% x 50% = EUR 1.10 million) | Partly (estimate) | Reasonable |
| SOW-003 *(Example)* | Inherited residential property | 450,000 | Land registry extract; inheritance deed | Yes | Yes |
| SOW-004 *(Example)* | Accumulated savings from salary and allowance | 250,000 | Tax assessments 2021 to 2025; public salary scale for members of parliament | Yes | Yes |
| **Total** | | **3,200,000** | | | |

Narrative: [State whether the declared wealth is consistent with the
person's career, age and public income, and whether any part remains
unexplained.] *Example:* Total declared wealth of EUR 3.2 million is
consistent with an entrepreneur who sold a business in 2019 and
co-founded the customer. The components backed by independent records
(SOW-001, SOW-003 and SOW-004) total EUR 2,100,000, which is 65.6% of
the declared total. The remaining 34.4% (SOW-002) is an estimate of a
private holding, judged reasonable against the customer's filed
accounts. Public income since 2023 is modest relative to the total and
explains only part of SOW-004. No unexplained component remains.

### 4.1 Evidence quality

Rank evidence by independence and reliability. Strongest are records
created by a third party for its own purposes: notarised sale
agreements matched to bank receipts, land registry entries, probate or
inheritance deeds, audited accounts and tax assessments. Next are
documents prepared by professionals who owe duties to others, such as
a lawyer's or accountant's letter confirming a specific transaction.
Weakest are documents produced by the customer alone, such as a
self-prepared wealth statement or a spreadsheet of past income. Use
public sources to test plausibility: a company sale should be visible
in the register, a property in the land registry, a public salary in
the published pay scale. Where evidence cannot be obtained, say why,
describe the alternative work done and let the approver decide whether
the gap is acceptable. Never fill a gap with an assumption that is not
labelled as one.

## 5. Source of funds

<!-- Guidance: Source of funds is the origin of the specific money entering the relationship or transaction. For a company, it is usually trading income; for an individual, a salary, a sale or a loan. Pitfall: confusing source of funds with source of wealth, or accepting "savings" without seeing the account the money comes from. -->

Identify the origin of the money that will enter the relationship: the
initial deposit, any capital injection and the recurring flows. For a
trading company, compare expected inflows with filed revenue; for a
capital injection by an owner, trace it to the owner's account and to
the wealth component it comes from.

| ID | Flow | Amount (EUR) | Origin | Evidence | Assessment |
|---|---|---|---|---|---|
| SOF-001 *(Example)* | Initial deposit from previous bank | 650,000 | Customer's account at previous bank | Closing statement of previous account | Consistent |
| SOF-002 *(Example)* | Shareholder loan from Strand Holding Ltd | 400,000 | Strand Holding dividend income 2024 to 2025 | Loan agreement; holding bank statement | Consistent; condition CON-001 in KYC profile |
| SOF-003 *(Example)* | Recurring receipts | 1,540,000 a month | Trade customers in NL, DE, DK | 2025 accounts, aged receivables | Consistent with revenue EUR 18.4 million |

Check: twelve months of expected recurring receipts total 12 x
1,540,000 = EUR 18,480,000, which reconciles to filed revenue within
0.5% (18,480,000 / 18,400,000 = +0.43%).

## 6. Adverse media and open-source findings

<!-- Guidance: Run structured searches on every EDD subject in all relevant languages, record terms, sources and dates, and assess relevance and credibility. Pitfall: recording "no hits" without the search terms, so the reviewer cannot judge coverage. -->

Search public sources for each EDD subject: news databases, court and
insolvency registers, regulatory enforcement lists, procurement
records where the subject is a PEP, and corporate registers for
undisclosed interests. Record the search terms and languages so the
search can be repeated at the next review. Assess each finding for
credibility (reliable source or not), relevance (financial crime,
corruption, sanctions, fraud, tax evasion) and recency.

| ID | Subject | Source and date | Summary in your own words | Relevance | Credibility | Impact |
|---|---|---|---|---|---|---|
| ADM-001 *(Example)* | Tomas Ekhart | Regional newspaper, 2025-06 | Opposition questioned his vote on a ferry subsidy; the parliament integrity office found no conflict | Corruption allegation, closed | High (official finding on file) | Noted; monitor |
| ADM-002 *(Example)* | Quillmere Marine Supplies B.V. | Procurement register search, 2026-09-22 | No public tenders won or bid since 2020 | Confirms no public sector link | High | None |

Search log: [terms, languages, databases, date, analyst].

## 7. Risk conclusion

<!-- Guidance: Bring sections 3 to 6 together. Say what the inherent risk is, what evidence reduced uncertainty, what risk remains and whether it is within the institution's risk appetite. Pitfall: a conclusion that repeats the trigger without weighing the evidence. -->

State the inherent risk, the evidence that explains it and the
residual risk after mitigation. Compare the residual risk with the
institution's risk appetite for this customer type, as set in the AML
business risk assessment (`compliance/aml-business-risk-assessment`).

| Dimension | Inherent | Evidence and mitigation | Residual |
|---|---|---|---|
| PEP exposure *(Example)* | High | Domestic, mid-level function; no public sector customers; wealth predates office; integrity office finding | Medium |
| Structure *(Example)* | Medium | All layers explained and verified; owners identified | Low |
| Products and geography *(Example)* | Medium | Trade finance document review; no high-risk third country | Medium |
| **Overall** | **High** | | **Medium, within appetite with enhanced monitoring** |

Conclusion: [Three to five sentences.] *Example:* The relationship is
high risk because a beneficial owner is a domestic PEP and the
ownership includes a foreign holding and a trust. The wealth of the PEP
is mostly built before office and is corroborated by independent
records for 65.6% of the declared total, with the remainder supported
by a reasonable valuation. No link exists between the PEP's function
and the customer's revenue. Residual risk is within appetite if the
monitoring in section 10 is applied.

## 8. Mitigation measures and conditions

<!-- Guidance: List the measures actually applied, mapped to the trigger that requires them. Mandatory measures for each trigger come first; risk-based extras follow. Pitfall: measures without owners or dates, which nobody tracks. -->

Map every trigger to the measures applied. The AMLR (Art. 34(4), from
2027-07-10) lists the menu of enhanced measures: more information on
the customer and beneficial owners, on the intended nature of the
relationship, on source of funds and source of wealth, and on the
reasons for transactions; senior management approval; enhanced
monitoring with more frequent controls; and a first payment through an
account in the customer's name at an institution with comparable CDD
standards. Current national law under Directive (EU) 2015/849 Art. 18
and UK MLR reg. 33 set a similar risk-based expectation.

| ID | Trigger | Measure | Mandatory or risk-based | Owner | Due | Status |
|---|---|---|---|---|---|---|
| MIT-001 *(Example)* | TRG-PEP | Senior management approval (section 9) | Mandatory | [@rm] | Before account opening | Done |
| MIT-002 *(Example)* | TRG-PEP | Source of wealth and funds established (sections 4 and 5) | Mandatory | [@edd] | Before approval | Done |
| MIT-003 *(Example)* | TRG-PEP | Enhanced ongoing monitoring (section 10) | Mandatory | [@fcc-monitoring] | Ongoing | Active |
| MIT-004 *(Example)* | TRG-STRUCT | Annual confirmation of shareholders and trustees | Risk-based | [@rm] | Each review | Scheduled |
| MIT-005 *(Example)* | TRG-RISK | Document review on each trade collection; price plausibility sample of 5 invoices a quarter | Risk-based | [@trade-ops] | Quarterly | Active |
| MIT-006 *(Example)* | TRG-RISK | Alert if any payment to or from a public body appears | Risk-based | [@fcc-monitoring] | Ongoing | Active |

## 9. Senior management approval

<!-- Guidance: Senior management means a person with enough knowledge of the institution's ML/TF exposure and enough seniority to take decisions affecting it; it need not be a board member. Record who approved, on what information and when. Pitfall: approval obtained after the account was opened. -->

Obtain approval from senior management before establishing the
relationship and, for an existing customer who becomes a PEP, before
continuing it. The approver should be independent of the sales target
for this customer and should receive this memo in full. Record any
questions asked and the answers given.

| Item | Value |
|---|---|
| Approver and role | [@name, role] (*Example:* Chief Risk Officer delegate for financial crime, member of the executive committee) |
| Information provided | [This memo, version] |
| Questions raised | [Questions] (*Example:* Asked whether the PEP's committee oversees ferry contracts; answered in section 3.1) |
| Decision and date | [Approve / Approve with conditions / Decline], YYYY-MM-DD |
| Approval reference | [Workflow or minute reference] |

## 10. Enhanced monitoring plan

<!-- Guidance: Describe how monitoring will differ from standard customers: thresholds, extra scenarios, manual reviews, frequency. Pitfall: "enhanced monitoring" written in the memo but no change configured in the monitoring system. -->

Set out what changes in monitoring for this customer while EDD
applies. Typical changes are lower alert thresholds, additional
scenarios linked to the trigger (for a PEP, payments involving public
bodies or unusual cash), periodic manual review of a sample of
transactions and more frequent screening. Confirm that the changes are
configured in the monitoring system, and record the configuration
reference. The scenario design itself belongs in the transaction
monitoring specification (`compliance/transaction-monitoring-scenario-spec`).

| ID | Control | Parameter *(Example)* | Frequency | System reference | Owner |
|---|---|---|---|---|---|
| MON-001 *(Example)* | High-risk segment assignment (lower thresholds) | Segment HR-PEP | Continuous | [TM config ref] | [@fcc-monitoring] |
| MON-002 *(Example)* | Manual review of top 20 payments by value | Sample of 20 | Quarterly | [Case template ref] | [@edd] |
| MON-003 *(Example)* | Adverse media rescreening of PEP and owners | Daily automated | Continuous | [Screening profile] | [@screening] |
| MON-004 *(Example)* | Activity versus profile check | Variance above 25% escalated | Quarterly | [Report ref] | [@rm] |
| MON-005 *(Example)* | Full EDD refresh | Annual | 12 months | This memo | [@edd] |

PEP status end: [Record the end date of the function and the earliest
date on which the PEP measures may be reconsidered.] *Example:* If the
term ends in 2028-03, PEP measures continue to at least 2029-03, then
continue until the bank concludes that no further PEP-specific risk
remains.

## 11. Decision and rationale

<!-- Guidance: One clear decision, the reasons and the conditions. If EDD cannot be completed or the risk is outside appetite, decline or exit and consider a report to the financial intelligence unit. Pitfall: an "approve with conditions" decision where the conditions are never checked. -->

Record the decision, the reasons and the conditions. If the
institution cannot complete EDD, or the residual risk is outside
appetite, it must not establish (or must end) the relationship and must
consider whether to report suspicion to the financial intelligence unit.
Do not tell the customer that a report has been considered or made.

| Item | Value |
|---|---|
| Decision | [Accept / Accept with conditions / Decline / Exit] (*Example:* Accept with conditions) |
| Rationale | [Summary from section 7] |
| Conditions | [Measures MIT-NNN and MON-NNN that are conditions] (*Example:* MIT-004, MIT-005, MON-001 to MON-005) |
| Effective date | YYYY-MM-DD |
| Next EDD review | YYYY-MM-DD (*Example:* 2027-09-30) |
| Exit criteria | [Events that would lead to exit] (*Example:* Undisclosed public sector revenue; adverse finding by an integrity office; refusal to provide refresh documents) |

Communicate the outcome to the customer in neutral terms. When the
relationship is accepted with conditions, tell the customer which
documents or behaviours the conditions require, such as annual
shareholder confirmations, without disclosing internal risk scores.
When the relationship is declined or ended, give the reason your
policy allows and keep the full rationale in this memo. If a report to
the financial intelligence unit has been made or is being considered,
the decline letter must not hint at it.

At each annual refresh, repeat sections 3 to 7 with current facts,
compare actual activity with the profile and the monitoring results
from section 10, and record whether every condition was met. A refresh
that only updates the date is not a review.

## 12. Glossary and references

<!-- Guidance: Define terms in your own words and keep the reference list to the rules you actually rely on. -->

| Term | Meaning in this memo |
|---|---|
| Close associate | Person with known close business or personal ties to a PEP, as defined in the applicable law |
| EDD | Enhanced due diligence: extra measures for higher-risk relationships and transactions |
| Family member | Relatives of a PEP covered by the applicable law (spouse or partner, children and their partners, parents; under the AMLR, siblings for certain categories of PEP (check the Art. 2 definition)) |
| High-risk third country | Country identified by the European Commission or a national authority as having strategic AML/CFT deficiencies |
| PEP | Politically exposed person: individual entrusted with a prominent public function |
| Senior management | Officer or employee with sufficient knowledge of the institution's ML/TF exposure and seniority to decide on it |
| Source of funds | Origin of the money used in the relationship or transaction |
| Source of wealth | How a person accumulated their total wealth |

References (obtain current versions):

- FATF Recommendations 10, 12 and 19 (cited by number and title only).
- Directive (EU) 2015/849 as amended, Arts 18, 18a and 20 to 23, and the [Member State] transposing law; the Commission delegated regulation listing high-risk third countries (current consolidated version).
- Regulation (EU) 2024/1624 (AMLR), Arts 29 to 31, 34, 35, 41 to 46, applies from 2027-07-10, EUR-Lex.
- EBA Guidelines on ML/TF risk factors (EBA/GL/2021/02), as amended.
- UK Money Laundering Regulations 2017 (SI 2017/692), regs 33 and 35; FCA guidance on the treatment of PEPs (FG17/6, name only).
- 31 CFR 1010.605 (definitions, including senior foreign political figure), 31 CFR 1010.620 (private banking accounts), eCFR.
- Related templates: KYC and CDD Customer Profile (`compliance/kyc-cdd-profile`), Customer Risk Rating Methodology (`compliance/customer-risk-rating-methodology`), AML Business Risk Assessment (`compliance/aml-business-risk-assessment`), Transaction Monitoring Scenario Specification (`compliance/transaction-monitoring-scenario-spec`), SAR and STR Narrative (`compliance/sar-str-narrative`), Sanctions Compliance Procedure (`compliance/sanctions-compliance-procedure`), Correspondent Banking Due Diligence (`compliance/correspondent-banking-due-diligence`).

## Standard and licence note

Based on public law: EU legislation from EUR-Lex (Directive (EU)
2015/849 and Regulation (EU) 2024/1624), reused with acknowledgement
under Commission Decision 2011/833/EU and summarised in original
wording; US federal regulations in 31 CFR Chapter X (US government
works); and the UK Money Laundering Regulations 2017 cited by
regulation number. FATF Recommendations, EBA guidelines and FCA
guidance are cited by number and name only; no text from them is
reproduced. This template is not affiliated with or endorsed by the
European Commission, the EBA, the FCA, FinCEN, AMLA or the FATF. All
names, companies and figures in the examples are fictional. This
template is original text written for this collection. Check the
current official version of each law and your national transposition
before use. Template licence: MIT.