Enhanced due diligence procedure: what the decision maker looks at
Enhanced due diligence procedure moves a file from routine checks to a decision that someone signs their name to. The decision maker looks at three things: why the file was escalated, whether the evidence closes that gap, and whether the residual risk is acceptable under the entity's own risk appetite. Nothing in the standard file is discarded — it is re-read against a higher bar.
This page describes how that review runs inside an obliged entity handling digital assets. It does not name a statute or set a legal deadline. It sets out the order of steps, who has authority at each step, and where a file stops being reversible.
Why a file moves from standard to enhanced
A standard check clears a file when identity, ownership, and purpose of the relationship are consistent with what the client says. Enhanced due diligence procedure starts when one of those three stops being consistent — a mismatch in source of funds, a jurisdiction flagged as higher risk, a beneficial owner who is hard to verify, or a transaction pattern that does not match the stated business.
Once a file is escalated, it does not return to the standard track without a documented reason. The escalation itself is the point that later gets checked, internally or by a supervisor, so it has to be recorded at the moment it happens, not reconstructed afterwards.
Stages of the procedure
| Stage | What happens | Typical timing |
|---|---|---|
| Trigger identified | Screening, onboarding, or transaction monitoring raises a risk indicator | Same business day the indicator appears |
| File escalated | Case moves from the first-line officer to a senior reviewer or the compliance function | Within a few working days, set by internal policy |
| Enhanced measures ordered | Additional documents, source-of-funds evidence, and independent verification are requested | No fixed external limit; tracked against an internal deadline |
| Decision recorded | Approve, reject, or hold pending further evidence | Before the file leaves the enhanced queue |
| Point of no return | The file cannot go back to standard treatment once formally escalated | Fixed at the escalation step, not renegotiable later |
The stage that surprises most clients is the last one. Once escalation is logged, an entity cannot quietly downgrade the file back to standard handling to save time. Reversing that classification needs its own documented reason, reviewed at the same seniority that ordered the escalation.
What to do next
- The client or counterparty gathers the specific documents named in the escalation notice, not a generic compliance pack.
- The compliance officer records why each document was requested and what gap it is meant to close.
- Senior management reviews the file once the evidence is in, not before.
- The decision — approve, reject, or extend — is recorded with the name of the person who made it.
- If the relationship is approved, monitoring frequency is reset to match the residual risk, not the original risk band.
Who makes the decision
In most obliged entities handling digital assets, the first-line officer cannot close an enhanced file alone. Sign-off sits with a designated compliance function — commonly the money laundering reporting function or an equivalent senior role — sometimes with an additional layer at board or committee level for higher-risk relationships. The exact split of authority is set out in the entity's own internal policy, not in this page.
What stays constant across entities is the separation of roles: the person who gathers evidence is not the person who decides. That separation is what a supervisor checks first if the file is ever reviewed after the fact.
Where this crosses into other files
A handful of situations that arise during enhanced due diligence belong to a different decision entirely, and it helps to know where the line sits before the file gets stuck on the wrong question.
If the counterparty is itself a licensed provider and its cross-border authorisation was refused or withdrawn, the risk assessment does not stop at your own file — see Passporting is refused authorisation who decides and when for how that separate decision is made and on what timeline.
If declared income in the source-of-funds evidence comes from a licensing arrangement, the wording of that licence matters more than clients expect — When exclusive and sole are used interchangeably sets out why the two terms are not the same right and who resolves the difference.
If the client's business rests on a patent position and a competing claim to the same invention surfaces during the review, that is an ownership dispute, not an AML question — When the same invention is granted to someone else covers who decides that and when.
If the structure being reviewed includes a reseller or distributor acting on terms the client never negotiated directly, the enhanced file should treat that as a separate contractual question — When a reseller signs terms you never saw explains how that gets sorted out.
What this page does not decide
This page describes the internal procedure, not the legal obligation to run it. It does not set the exact deadline your entity's AML programme applies, because that deadline is fixed by the entity's own policy and by the AML regime that applies to its registration, not by a general description of practice. It does not tell you whether a specific client should be escalated — that judgement depends on facts this page cannot see. And it does not replace advice on a file that is already stuck at the point of no return.
Verified
This page was last checked against current internal-procedure practice for obliged entities handling digital assets. It does not cite statutory text or a specific regulation, by design: procedural pages on this site describe the order of steps and the decision maker, not the underlying legal reference. Where a client's file needs a statutory basis stated, that sits in a separate legal-basis page for the relevant jurisdiction.
Related reading
The same escalation logic — a file moving from routine to reviewed, with a named decision maker at each step — runs through the screening side of the same programme. See Screening tuning step by step for how the trigger itself gets calibrated before a file ever reaches enhanced review.
FAQ
How long does enhanced due diligence procedure take in practice?
There is no single external deadline. Duration depends on how quickly the client produces the requested evidence and how many escalation layers the entity's own policy requires. A straightforward file can close within days; a file with an unresponsive counterparty can sit open for weeks.
Which documents are needed to start?
The escalation notice names the specific gap — source of funds, beneficial ownership, or jurisdiction risk — and the documents requested map to that gap. A generic compliance pack rarely satisfies an enhanced request; the evidence has to answer the question that triggered escalation.
What happens if the other side does not respond?
The file does not default to approval by silence. Non-response is itself recorded and typically pushes the file toward a hold or a decline, since the residual risk cannot be assessed without the missing evidence. The decision maker documents that outcome the same way as any other decision.