Due diligence factors are the fundamental factors that go into the risk assessment process for conducting a due-diligence examination. The process can be beneficial to a variety of stakeholders, including acquiring companies looking to evaluate the potential target company prior to a merger or an acquisition; investors looking for an exhaustive evaluation of risk prior to investing; and prospective employees who are evaluating possible candidates for employment.
The process of due diligence can involve a number of different checks depending on the purpose and the scope. Checks can include identity verification, screening of sanctions lists, criminal watchlists, as well as an investigation into funds sources. In addition an approach based on risk must be used to determine if enhanced due diligence (EDD) measures must be applied. Customers who are at greater risk of money laundering and terrorist financing will require additional measures, including increased monitoring of transactions patterns and gathering more details.
EDD could include evaluating the beneficial ownership of corporate clients in order to reduce the risks associated with hidden ownership. The process can also include reviewing the structure of the company’s business operations and identifying any relationships with public officials that could lead to bribery or other corruption offences. Additionally, it is essential that EDD includes periodic reviews of international sanctions lists in order to ensure compliance with regulations.
A successful due diligence procedure will provide a summary of the most important findings for those who don’t have time to read the entire report. The summary should be concise and include the kind of due diligence that was completed (e.g. thorough risk analysis before investing in a business) and the reasons for the diligence, and any significant findings.
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