Most businesses are required to carry out some form of due diligence in meeting their regulatory, contractual or legal obligations and to mitigate the risks associated with standard business relationships such as working with suppliers, customers, employees and other third parties. Carrying out effective and adequate due diligence also helps to protect an organisations’ customers from risk or harm.
For organisations working in the financial or credit industry, due diligence is a must and is part of the mandatory compliance framework required by the regulating body, the FCA. It is also a mandatory requirement for any business or individual who has obligations under the Money Laundering Regulations 2017 (MLR17). Due diligence is essential for preventing financial crime and terrorist financing and alongside risk assessment, forms the foundation of an effective anti-money laundering program.
Due Diligence, sometimes referred to as Know Your Customer (KYC), is the process of verifying, validating, assessing and auditing the entities and individuals with whom a business forms a working relationship. It can be as simple as verifying an identity and address, or as in-depth as investigating known business contacts or associates, researching a person or company’s background and financial status verification.
When it comes to having a Due Diligence Policy, most organisations will break their due diligence processes down into 3 main categories: –
- Simplified Due Diligence – there are certain instances when a less intense form of due diligence is required, which is often referred to as ‘simplified’ and is acceptable where a relationship or business transaction presents very low risk after performing a risk assessment.
- Standard Due Diligence – the default process for assessing business relationships and transactions which can include verifying name, address, background, credit and financial status, criminal record checks, business/employment history etc.
- Enhanced Due Diligence – some business relationships or transactions pose a much higher risk than others and require a more intense form of due diligence known as ‘enhanced’. Examples of when EDD is required can be areas flagged as high risk after a risk assessment has been completed; working with a high risk country; or where the customer is a PEP.
Know Your Compliance Limited have been writing regulatory compliance documents for over 15 years and have developed our highly recommended Due Diligence Policy and Questionnaire Pack based on the regulatory, legal and business requirements of thousands of organisations. Alongside the 15 page policy, the pack also includes 4 due diligence questionnaires for carrying out detailed and demonstratable checks on business relationships, customers, suppliers and employees, as well as including our due diligence checklist to ensure firms are meeting all of their due diligence requirements.
For those organisations looking to incorporate their due diligence policy and measures into a compliant anti-money laundering policy program, our complete due diligence pack is already included in our AML Toolkit. The MLR17 has mandatory requirements around having an AML Policy, adequate due diligence controls and effective risk assessment measures and our AML Toolkit covers all of these requirements, as well as supporting areas such as checklists, outsourcing, whistleblowing and conflicts of interest. The policies and templates in the Anti-Money Laundering Toolkit also aid compliance with the FCA and HMRC anti-money laundering requirements.
All of our documents and templates are fully customisable and come with the first annual update free of charge. Available for instant download after payment has been made, why re-invent the wheel when you can start with our market leading policy templates and create a compliance program that reflects your business objectives and obligations.