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Due diligence is an essential process of compliance that acts as a defense against financial crimes, such as money laundering and terrorist financing. As EDD requirements continue to grow, it’s essential that organizations come up with strategies that are flexible and address the unique characteristics of each region, while ensuring they adhere to global best practice and industry standards.
Although it might seem like to be a time-consuming and laborious task doing due diligence can be a time-consuming and difficult task, it’s an essential aspect of business. The process is usually split into two broad areas: the purchase or sale of services or goods, and mergers and acquisitions. Due diligence in both situations is performed to ensure that businesses are completely informed before entering a transaction.
To accomplish this, businesses must investigate the background and reputation of potential third parties. This can include a review of internet search results, questionnaires and verification through independent sources such as business registries and watchlist databases. In addition, a thorough analysis of management structures is a crucial aspect to take into consideration. It is essential to know the ownership percentages of senior executives and founders. It is also worth checking if 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 counter-terrorism financing regulations. This is based on a variety of factors, including the jurisdiction in which they operate as well as the type and volume of transactions that they conduct and the source of funds used for those transactions. A thorough review of AML policies and local market reputations via media sources can help to improve risk assessments.
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