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KYC

Due Diligence (DD)

Due diligence is a comprehensive, systematic investigation process undertaken by organizations to assess the economic, legal, fiscal, and financial circumstances with a business relationship or transaction and as needed, mitigate any potential associated risks. 

Effective due diligence protects organizations from legal and financial repercussions by ensuring compliance with regulatory requirements. It also helps maintain the integrity and reputation of the business by avoiding associations with illicit activities or high-risk entities.

Typical due diligence processes involve a thorough review and verification of various aspects of the counterparty, including their identity, financial standing, legal compliance and overall integrity and thus would mean that aspects such as sales figures, shareholder structures and potential links to economic crimes like corruption and tax evasion need to be looked at. The primary objective of due diligence is to ensure that the organization is fully informed about the potential risks and benefits before entering into any formal engagement. For higher-risk customers or transactions, enhanced due diligence (EDD) may be required.

In the context of compliance and Know Your Customer (KYC) procedures, due diligence is essential for preventing financial crimes such as money laundering, fraud, and terrorist financing.

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