Compliance: Due Diligence Check
You can be complying to regulations, but how safe are you to trust another entity/business partner while making business transactions/contracts/investments without running a compliance investigation on the entities involved to reduce or avoid perceived/pending business risks that could ruin your business?
Managing financial crime risk in regulated institutions and during business transactions cannot be overemphasized. Yearly, cases of financial crimes ranging from fraud, modern slave trade, money laundering, financed terrorism and other related political, economic, legal crimes have been on the constant rise. And such crimes have made it a necessity for certain laws regulating institutions and entities to take effects on business relationships with any entity across the world and within respective nations.
For standards of these regulating laws to be met, there is need for compliance with respective laws which regulates and safeguards entities about to be/already involve in a contract or any business transaction. Hence, there is need for certain levels of Due-Diligence check.
WHAT’S DUE DILIGENCE CHECK ?
According to Cambridge Dictionary, Due diligence means “The detailed examination of a company and its financial records, business transactions, done before becoming involved in a business arrangement with it.”
The concept of due diligence check involves careful investigation of the economic, legal, fiscal and financial circumstances of a business or individual. This seeks to uncover facts concerning areas such as sales figures, shareholder structure and possible links with forms of economic crime such as corruption and tax evasion of any business or individual one has intention(s) to partner, acquire, venture or sign a contract with. Thus, helping you know your customer/business partners better.
IMPORTANCE OF DUE DILIGENCE CHECK
The following includes the reasons why due diligence check should be conducted:
● To confirm and verify information about the entities involved and deal that was discovered before and during the process of a business transaction.
● To detect potential risks and defects in the deal or investment opportunity in order to avoid a bad business transaction
● To get information that would be helpful in valuing the deal
● To ensure that the deal or investment opportunity stays in line with the criteria needed to make the investment or deal a successful transaction.
