Understanding Financial Institutions and EDD Requirements on Conduit
When onboarding with Conduit, it's essential to understand whether your organization—and your customers—qualify as Financial Institutions (FIs) or Non-Financial Entities. This classification directly impacts your compliance requirements and access to features like treasury management, named accounts, and USD payment capabilities.
What Is a Financial Institution (FI)?
A Financial Institution is any legal entity that handles money on behalf of others. These businesses often serve as intermediaries that move, hold, or exchange funds that don’t belong to them.
Even if your company doesn’t have a financial license or doesn’t self-identify as an FI, certain activities may still classify it as one.
Common FI activities include:
- Holding funds on behalf of users
- Processing payments between third parties
- Facilitating foreign exchange (FX)
- Providing custodial wallets or digital accounts
- Redistributing funds in payroll or payout models
Examples of Financial Institutions:
- Banks and credit unions
- Remittance companies and payment processors
- Digital asset platforms and licensed crypto exchanges
- Fintech companies offering financial services
- Investment firms and FX dealers
What Is a Non-Financial Entity?
A Non-Financial Entity is a business that uses financial services for its own operations—not for others. These companies do not act as intermediaries and only send or receive funds related to their own business activities.
Common Non-FI activities include:
- Paying suppliers or service providers directly
- Receiving customer payments for products or services
- Managing payroll or internal treasury
Examples of Non-Financial Entities:
- Retailers and e-commerce companies
- Manufacturers and logistics firms
- SaaS or software companies
- Import/export businesses managing their own operations
Why This Classification Matters
The distinction between FIs and Non-FIs determines how Conduit handles onboarding, documentation, and ongoing compliance. It also affects access to specific features:
Incorrect classification can lead to delays during KYB review and limited access to key features.
If Your Customers Are FIs: EDD Is Required
If any of your Customers are classified as Financial Institutions, they must complete an Enhanced Due Diligence (EDD) form before sending or receiving USD through Conduit.
EDD is a regulatory compliance requirement designed to:
- Ensure secure and compliant payment flows
- Protect against financial crime
- Avoid delays in USD transactions
- Unlock faster settlement times
Submitting the EDD form is not optional—it’s essential for uninterrupted access to USD corridors.
How to Know Which Customers Require EDD
When using your Conduit dashboard, you may be prompted to indicate which of your Customers are Financial Institutions. Based on your selection:
- If all Customers are FIs, you’ll receive a link to share the EDD form with all of them.
- If some are FIs, you’ll select which ones and get a link to share with those specific Customers.
- If none are FIs, no further action is required.
Even though your selections won’t be visible in the dashboard, they are recorded internally to streamline compliance.
What to Expect When Sending USD
When initiating a USD transaction:
- If the Customer’s EDD is incomplete, you may see a reminder to complete the form.
- If the EDD is complete, you’ll see confirmation that the Customer benefits from faster settlement times.
This helps avoid delays and reduces the chance of additional compliance requests.
