Due diligence is a crucial compliance process. It safeguards against financial crimes, such as money laundering and terrorist financing. Due diligence requirements are expanding and it is essential to develop strategies that are specific to the specific requirements of each location while ensuring the international standard for best practices.
Due diligence may seem like a time-consuming and tedious task however, it is an essential aspect of running a business. The process is usually split into two broad areas: the purchase or sale of goods and services, and mergers and acquisitions. In both cases due diligence is carried out to ensure that companies have all the necessary information virtual data room service providers before entering into a deal.
Companies must investigate the background, reputation, and affiliations of third parties. This could include the use of a search engine or questionnaires, as well as verification through independent sources such as business registries or watch list databases. In addition, a thorough analysis of the management structure is a vital factor to consider. It is important to understand the ownership percentages of senior executives and founders. It is also worthwhile to check whether these individuals have sold shares in the past.
KYC/Know Your Customer checks are more specific for high-risk customers, as required by anti-money laundering laws and anti-terrorism financing regulations. This is usually based on factors such as the location of their operations and the type of transaction they conduct and the source of the funds used for those transactions. A thorough review of AML policy and local market reputation via media sources can also assist in the development of risk assessments.
