Who needs to conduct due diligence checks, what are due diligence reports, and what kind of industries and companies can utilise them best?

Due Diligence Reports – The What, Why, and Who

Are you doing your due diligence? It’s an important step for any company in the financial sector, and indeed for any business that processes large sums of money or deals with sensitive data and high-risk individuals.

In the following guide, we’ll take a closer look at due diligence reports and enhanced due diligence checks, showing you what they are, why they are important, and how you can stay compliant.

What is Due Diligence?

Due diligence refers to the process of taking reasonable care in the course of doing business. It may involve a series of checks relating to the finances of an individual or business, with a view to preventing money laundering and other illegal activities.

Why Do Companies Need Due Diligence?

There are several reasons why companies conduct due diligence:

Compliance: Depending on the industry, a company may need to conduct due diligence to confirm that the clients they are dealing with are not on any sanctions list and that the funds they receive have not come from money laundering. These checks often relate to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.

 Successful and Timely Transactions: Due diligence checks are required to ensure you’re dealing with legitimate and honest clients, ones who will complete transactions in a timely manner. Time is money, and you can’t afford to deal with clients who will waste it.

 Liability Protection: Companies who don’t complete the necessary due diligence checks may be at risk of serious legal consequences. Failure to abide by certain rules and regulations could lead to hefty fines and other legal ramifications.

Who Needs It?

Due diligence is required in a number of different industries, including:

The Financial Industry: Trading companies, cryptocurrency exchanges, and financial institutes have some of the strictest legal requirements, as they facilitate the transfer of vast sums of money and can be targeted by money launderers. Enhanced due diligence is required to detect red flags and minimise risk across all areas of the business.

Gambling: The casino and sports betting industry in the UK is subject to KYC and AML requirements and operators are also asked to report large transfers, confirm the age of all players, and complete source of funds requests for players who gamble irregularly.

Legal: Legal firms must complete checks on their clients and learn exactly where their money is coming from. This is true across commercial and personal sectors.

Operational Due Diligence: Companies can use due diligence reports to look for risk factors within an organisation. In such cases, the goal is not to meet any compliance requirements but to ensure that the company is operating efficiently and is on course to meet expectations.

Partners and Mergers: Adue diligence check can be conducted prior to a company merger and before signing a major contract, with the goal being to confirm that the partner/business is reputable.

  Internal Checks: You need to know who you’re hiring, if you can trust them, and if there have been any serious sanctions or legal proceedings against them. As a result, due diligence can also be conducted against your own executives and directors. After all, your business may be responsible for their actions.

Types of DD Reports

A due diligence report contains a detailed rundown of all completed due diligence checks. It also lists the processes involved with conducting those checks.

Due diligence checks cover a wide range of services and resources, including:

Sanctions Lists

Sanctions lists must be checked to ensure that the entities with whom you’re doing business have not been subject to national or international sanctions. Individuals and companies can find themselves on these lists as a result of human rights violations, terrorist activities, and war.

For instance, following the Russian invasion of Ukraine in early 2022, hundreds of Russian individuals and companies were added to sanction lists maintained by the United Kingdom, European Union, and the United States.

Check out A Data Pro’s comprehensive list screening services to learn more.

Watch Lists

Watch lists, like sanctions lists, contain individuals with whom you shouldn’t do business. The difference is that these lists are maintained by national and international crime organisations, including Interpol, Europol, and the U.S. Federal Bureau of Investigation (FBI).

Individuals added to these lists are usually wanted in connection with illegal activities or have been suspected of serious crimes such as terrorism.

Politically Exposed Persons (PEP) Lists

PEP lists contain individuals who are deemed to be in highly influential positions that may be prone to corruption, bribery, and money laundering.

There are no laws against doing business with these persons, but enhanced due diligence is required to ensure that everything is above board.

Company Profiles

A company profile contains detailed information about the legal status of a company. These checks can be conducted before an acquisition or merger and are used to ensure that the company’s ownership structure, legal incorporation, and control mechanisms are all legal and compliant.

Compliance Related Lists

These lists contain information about individuals who have been fined or otherwise restricted. For instance, they may have been banned from conducting certain commercial activities.

Summary of Legal Proceedings

Contains information pertaining to legal proceedings involving the individual(s). These due diligence reports will determine whether or not there have been any court proceedings filed against the entity or entities and whether these are cause for concern.

How to Choose the Right Partner

Due diligence checks can be conducted in-house or by external providers. The latter is the preferred option if you want a thorough check by experienced compliance experts.

When looking for a DD partner, focus on one that can provide a wide breadth of services, has a knowledge of multiple different languages, and knows how to find the right data and extract key information from it.

You need a data expert, and that’s where we come in.

How At A Data Pro Can Help You

At A Data Pro, you can choose from an ever-growing list of over 25 reports, ensuring you stay compliant regardless of where you are and what kind of business you do. We can dig deep and cover all bases, keeping your operations compliant in the face of ever-changing and highly demanding regulations.

Check out our due diligence reports now to learn more about the services that we provide and the ways that we can help you.