Firstly, would you please briefly explain what Due Diligence is? Due Diligence is a process that should be undertaken to better understand the person, organisation, or business you are considering transacting with. Think of it as a risk management activity. It is an essential element of business and for those companies regulated for the purposes of money laundering, is fundamental to their compliance with legislation and good governance. In my opinion, Due Diligence is an investigatory function and should be treated as such. A failure to conduct it appropriately leaves the business exposed to a range of issues including regulatory intervention, reputational damage and has been seen in the media many times, including court action. When is Due Diligence most commonly used? Companies that work in the financial services industry are well acquainted with Due Diligence. It is an obligation that they must undertake to ensure that funds or other assets they are receiving are not tainted from any connection to money laundering, tax evasion, criminality, terrorism, weapons of mass destruction or anything that may cause their organisation harm. However, there are other applications for it, mergers and takeovers are good examples. What does the process for Due Diligence typically look like? I always say when I train compliance officers that the depth of information obtained from the client or business is fundamental. So, the first stage in the process is collecting data from the subject, this can be referred to as KYC, or ‘Know Your Customer’, and it should be thorough. What I mean by that is things like full names, previous names, physical and email addresses, a certified full-colour image of an identity document and proof of address, such as a utility bill are the minimum requirements. At that point, an initial assessment should be undertaken to identify any obvious exposure or issues. It might be that the customer lives or operates in a high-risk jurisdiction, or their business offers products and services that are beyond the tolerance of the organisation that is considering onboarding them. To fully understand those risks is where Due Diligence can assist, and where people like me come in. It tends to be the case that I will be contacted and engaged directly by a client. For reasons of confidentiality, Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s 35
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