Due diligence is a critical compliance process that serves as a deterrent against financial crimes such as money laundering and terrorist financing. As EDD requirements continue to grow, it’s essential that organizations develop strategies that are tailored to the unique challenges of each region, while ensuring they are in line with global best practices and industry standards.

While it may seem a laborious and time-consuming task, doing content due diligence is an essential aspect of business. The process usually covers two major areas: the sale or purchase of goods and services, and mergers and acquisitions. Due diligence in both cases is conducted to ensure that businesses are fully informed before entering a transaction.

Businesses must verify the background of the company, its reputation, and affiliations with third parties. This can include the use of a search engine and questionnaires, or verification through independent sources like business registries or watch list databases. A thorough analysis of the structure of management is also important. Founders and other senior executives typically hold a greater percentage of company shares, so it is important to understand the ownership levels of these individuals. In addition consider whether these individuals have been selling shares recently.

Customers at risk of being a victim of fraud require more thorough KYC/Know Your Customer (KYC) checks, a requirement of anti-money laundering and combating the financing of terrorist laws. This is often determined by factors like the jurisdiction in which they operate, the type of transactions they carry out and the source of the funds used for the transactions. Additionally reviewing the AML policies and local market reputations through media sources is an excellent method to further refine risk assessments.