Risk Factors for Due Diligence

Due diligence is a vital compliance process. It safeguards against financial crimes such as money laundering and terrorist financing. As EDD requirements continue to increase it is crucial that businesses create strategies that are nimble and able to address the unique dynamics of each region, while also ensuring they adhere to global best practice and industry standards.

Due diligence might seem like an arduous and time-consuming task but it’s an important part of doing business. The process usually covers two main areas: sale or purchase of services and goods, as well as mergers or acquisitions. In both instances due diligence is conducted to ensure that businesses have all the information they need prior to entering into a transaction.

To do this, companies must investigate the background, reputation and affiliations of potential third-party companies. This can be done through a review of search results on the internet, questionnaires and verification through independent sources like watch lists and business registry databases. Additionally, a careful analysis of management structures is a crucial aspect to take into consideration. Founders and other senior executives tend to hold the largest percentage of company shares, so it is important to understand their levels of ownership. It is also worthwhile to check if these individuals have http://www.getvdrtips.net/best-stock-news-sources-to-follow sold shares in the past.

KYC/Know Your Customer checks are more thorough for high-risk clients as required by anti-money laundering laws and counter-terrorism financing rules. This is usually based on factors such as the location of their operations, the type of transactions they conduct and the source of the funds used for the transactions. A thorough review of AML policy and the local market’s reputation via media sources can help to improve risk assessments.