Which regulation introduced the concept of enhanced due diligence?

The concept of enhanced due diligence is primarily associated with the Bank Secrecy Act (BSA). This regulation was established to combat money laundering and other financial crimes, requiring financial institutions to implement measures that ensure the identity of their customers and monitor their transactions for suspicious activity.

Under the BSA, enhanced due diligence refers to additional scrutiny that financial institutions must conduct for higher-risk customers, including those with complex ownership structures or those involved in jurisdictions known for money laundering. This enhanced approach ensures that adequate measures are in place to mitigate risks associated with such customers.

The BSA evolved to address the growing complexity and sophistication of financial crimes, highlighting the necessity for a thorough understanding of the risks posed by certain customers and transactions. By implementing enhanced due diligence practices, institutions can better protect themselves and the financial system as a whole from illicit activities.