Write a Due Diligence Policy

When you write a due dilience policy from scratch, it is important to understand your aims and obligations. Identify if you have any specific regulations or industry requirements for the Know Your Customer Controls. Businesses with obligations under the Money Laundering Regulations will want to write a due diligence policy that ties in with their AML Policy and anti money laundering compliance program.

Due diligence is often legal requirement and should be carried out on customers, suppliers and employees. Understanding who a company forms business relationships with is fundamental to risk assessment and protection. Due Diligence also goes hand in hand with anti money laundering compliance and AML risk assessments.

What is Due Diligence?

Due Diligence Policy Template Due diligence is sometimes referred to as ‘Know Your Customer’ and is the assessment and monitoring of an individiual or entity that a company works with. This includes suppliers, service providers, clients, customers and employees.

Many firms forget about employees when they write a due diligence policy. Tie the checks in with any HR policies for recruitment, selection and induction. As per the money laundering regulations, there are 3 tiers of due diligence checks. These are dependant on the risk, transactions and customer.

SDD – Simplified Due Diligence is used in instances of low risk, possibly for existing customer checks or those with single, low transactions.
CDD – Customer Due Diligence is the standard for due diligence checks used in most cases for verification and identification.
EDD – Enhanced Due Diligence is used for high-risk customers, large transactions, or specialised instances such as PEP’s or those from the FATF high risk countries or listed in the UK’s Money Laundering and Terrorist Financing (Amendment) (High-Risk Countries) Regulations 2021.

Due Diligence Process

A due diligence policy should document why background checks are carried out on individiuals and entities. However, it should also document how these checks and searches are completed. A business will carry out different types of due diligence on suppliers, employees and customers. Therefore, it is important to have documented due diligence procedures for each type of process and verification.

An important part of the process is to document all information and obtain evidence of any searches, checks and vertifications. Remember to obtain copies of ID, business documents and address verification as evidence to suppor thte due diligence process.

Know Your Customer Objectives

A due diligence procedure should list the company’s objectives. This is how they aim to carry out and maintain compliance with the due diligence rules and requirements. The objectives will differ for each company and industry. However, we have listed some of the generic due diligence objectives below.

Know Your Customer checks are completed at the start of new business relationships
A Due Diligence Questionnaire is completed to obtain customer/supplier information
Each supplier, employee and customer is risk assessed via the due diligence information obtained
Suppliers are vetted to ensure that the service they provide is appropriate and fit for purpose
All due diligence measures are carried out in conjucntion with an Anti Money Laundering Policy
The company protects itself and its customers from risks and financial crime by carrying out due diligence checks on all associated businesses and individuals
Evidence to support due diligence assessments is obtained during verification and retained for a period of 5 years after the cessation of the relationship
There is a an annual review of all business relationships
Due diligence on new and existing employees forms part of our recruitment, induction and HR processes
Where there is a higher risk of financial crime, Enhanced Due Diligence is undertaken

Due Diligence Policy to Buy

Due Diligence Policy Template Know Your Compliance Limited have over 11,000 organisations using our policy templates and toolkits, so you will be in good company when you purchase from us!

We have already developed a market leading Due Diligence Policy Template and accompanying questionnaires. There is no need to draft your policies from scratch or reinvent the wheel.