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Due diligence is an essential process of compliance that acts as a protection against financial crimes like money laundering and financing of terrorists. Due diligence requirements are growing and it is essential that organizations develop strategies that are specifically tailored to the specific dynamics of each location while ensuring global best practices.

Although it might seem like an exhausting and time-consuming job performing due diligence, it is essential to business. The process is usually split into two broad areas such as the purchase or sale of services or goods, and mergers and acquisitions. Due diligence in both cases is carried out to ensure that businesses are completely informed prior to entering into a transaction.

In order to do this, companies must review the background and reputation, as well as affiliations with potential third parties. This could involve online searches or questionnaires as well as verification using independent sources such as business registries or watch list databases. Additionally, a careful analysis of the management structure is a vital factor to consider. Founders and other senior executives usually hold the largest percentage of company shares, so it is crucial to know the ownership levels of these individuals. 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, which is required by anti-money laundering and countering the financing of terrorism regulations. This is based on a variety of factors, including the country in which they operate, the type and amount of transactions they make, and the source of funds used for these transactions. A thorough analysis of AML policy and the local market’s reputation via media sources can help to improve risk assessments.