Due diligence is a vital compliance procedure that acts as a deterrent against financial crimes such as money laundering and terrorist financing. As EDD requirements continue to grow and grow, it's crucial that organizations come up with strategies that are flexible and address the unique challenges of each region, while also ensuring they adhere to global best practice and industry standards.
Due diligence may seem like an exhausting and time-consuming job but it's an essential element of running a business. It typically covers two primary areas: the purchase or sale of services and goods and mergers and acquisitions. Due diligence in both instances is carried out to ensure that businesses are well aware prior to entering into a deal.
To accomplish this, businesses must investigate the background as well as the reputation and affiliations of potential third parties. This can include a review of internet search results as well as questionnaires and selecting the perfect boardroom software verification via independent sources like watch lists and business registry databases. An in-depth analysis of the management structure is also important. Founders and other top executives typically hold an increased percentage of company shares, therefore it is crucial to determine their ownership levels. It is also worth checking whether they have sold shares in the past.
Customers with high risk requirements require more thorough KYC/Know Your Customer (KYC) checks, a requirement under anti-money laundering and countering financing of terrorism laws. This is usually dependent on factors like the jurisdiction in which they operate and the type of transaction they make and the source of the funds used for those transactions. A thorough review of AML policy and local market reputations via media sources can assist in the development of risk assessments.