Due diligence you can trust

The due diligence process involves thoroughly identifying, evaluating and verifying all available information on a person, company or entity. A due diligence check is especially important when you’re hiring or considering prospective business partners or new commercial relationship. By conducting a comprehensive due diligence process through a reliable source, you can be more informed and confident in your company dealings.

With corruption rife on an international scale, due diligence checking with a global reach is more important than ever. To protect themselves from liabilities and regulatory non-compliance and to ensure successful, legitimate business transactions, companies must make sure they have timely and accurate business intelligence.

Due Diligence Checklist

While some companies’ checklists are too narrow or too broad, our due diligence checklist is comprehensive enough not to omit anything important, while only including the diligence due - in short, what is necessary. Our checklist will help you target the level of third-party due diligence investigation required to mitigate risk.

To start with, you can ask:

• What countries am I doing business in, and where are my business contacts?
• Are foreign laws relevant to me?
• How much risk can be foreseen in doing business with the company in question?
• Are any politically exposed persons (PEPs) involved in the commercial relationship?
• Have I investigated any adverse reports about my potential business partner?
• Is the business or individual currently engaged in legal issues, or have they been in the past?
• Have I obtained information to confirm the true beneficial owners?
• What systems can I implement to thoroughly screen potential business partners?
• What information do I require on this third party, and where can I find it?
• What common external and internal threats do I need to consider, before entering into this relationship?

Due Diligence Source Checklist

For thorough due diligence checking, you will need to review information from a broad range of resources. In doing so, you will reduce your company’s risk of missing important information, or failing to satisfy the statutory compliance requirements. It’s also a good idea to consider: which due diligence process is right for you? Can you make do with free search engines, or should you be using paid online information services, specialist databases or the expertise of an outside adviser?

These sources can include:

Sanction lists

Countries, entities and individuals against whom national or international sanctions have been imposed in connection to conflict, human rights abuses, terrorism or other serious offences.

Watch lists

Third parties should also be screened against relevant law enforcement lists from Interpol, the U.S. Federal Bureau of Investigation (FBI), and national or regional wanted lists issued by police forces in any countries connected to the business or individual in question. Such lists may relate to terrorist screening or crime.

Politically exposed persons (PEP) lists

PEPs pose a higher risk of exposure to bribery, corruption, money laundering practices or other economic offences on the basis of their influential positions, whether in government or in another organisation. If a potential customer or business partner is identified as a PEP, you must ensure effective risk management by means of an enhanced due diligence checklist.

Compliance related lists

Compliance related lists contain information about natural and legal persons against whom enforcement measures have been taken, such as a fine, restriction of commercial activities or exclusion.

Company profiles

A company profile contains information on the formal legal incorporation of the company in question: the company’s corporate structure, ownership relationships and control mechanisms, for example.

Summary of legal proceedings

You will find information in summaries of legal proceedings about legal actions in which the legal or natural person in question may have been involved.

News reports

Current and archived news reports can play a useful part, for example, they can be used to check the reputation or official status of natural and legal persons. Regard news reports as being a supplement to traditional sources for due diligence investigation.

Types of Due Diligence Checks

There are a number of types of due diligence checks, depending on your industry.

Financial industry

Financial due diligence involves reviewing and assessing an individual’s or entity’s financial information and fiscal performance. This involves looking into financial factors such as earnings, assets, liabilities, cashflow, debt and management. This type of due diligence not only looks at the organisation’s financial results historically, but also examines its forecast financial results and future prospects based on the existing business plan.

Operational

Operational due diligence looks at an organisation’s operations and assesses both the risks and the potential for the organisation’s value to appreciate. This type of due diligence aims to confirm whether the organisation’s business plan is feasible given the operations that are in place as well as planned capital expenditure. It also analyses prospects for gleaning more value from the organisation by improving operations and looks at operational risks as well.

Commercial

Commercial due diligence investigates the market position of an organisation’s products and services to determine its commercial appeal.

Market

Market due diligence entails gathering data from industry experts, competitors, customers, suppliers and other third parties to look at the current and future market situation of an organisation.

IT industry

IT due diligence investigates a company’s IT environment to determine whether it’s efficient, cost-effective and secure and whether it can support the organisation’s growth.

Intellectual property

Intellectual capital due diligence examines and assesses an organisation’s intellectual capital – that is, its intangible assets. These assets include human capital, the value it derives from certain relationships, intellectual property and other structural capital. Basically, it’s looking at those attributes that differentiate one organisation from similar competitors.

Human capital

Human capital due diligence analyses and assesses an organisation’s human capital – that is, the economic value of its employees’ skills, education, knowledge, creativity, habits, personalities and other social attributes. The notion of human capital acknowledges that from employee to employee, labour is not equal and that organisations can invest in employees to improve their quality.

Looking for a Due Diligence Checklist?

A due diligence checklist is designed to take companies systematically through all the information required to investigate and assess potential threats.

Ultimately, a due diligence checklist can help companies:

• Better understand their customers, employees and vendors
• Protect the business from reputational, financial and regulatory issues
• Boost productivity
• Increase profitability
• Improve decision making

What Happens in the Enhanced Due Diligence Process?

There are five stages in the enhanced due diligence process:

1. Key information is provided by the prospect through a questionnaire—which is passed on to you either personally or through a third party.
2. For corporate entities: you will need to obtain official documents and contracts, as well as the company’s name, shareholders, beneficiaries, structure, associated PEPs, members of the board, and any other relevant records.
3. For individuals: the information required for review will depend on the nature of the proposed relationship.
4. For the most part, an individual will need to provide identity documents, records and sources of funds, and disclose any connection to politically exposed persons.
5. For prospective clients and third parties: you will need to cross check these entities against global sanction lists, as specified above.

Enhanced Due Diligence with LexisNexis®

LexisNexis offers powerful due diligence tools and a world leading collection of aggregated information on people, companies and countries. These solutions let you conduct enhanced global due diligence checks, take advantage of compliance monitoring services and screen individuals and companies around the world from one convenient source. Rather than going through the process of sourcing all the necessary information manually, we can take care of it all for you—all in one easy-to-use product.

Nexis Diligence™

Nexis Diligence enables you to perform comprehensive research to investigate and monitor third parties, customers and other entities with whom you do business. This simple and intuitive tool also helps you gather all the regulatory data you need to ensure your ongoing compliance. The built-in report builder allows you to produce tailored time and date stamped reports, to demonstrate your ongoing compliance efforts if you undergo a regulatory audit.

With Nexis Diligence™, you have access at your fingertips to:

• More than 150 premium business information databases
• Millions of public and private company profiles covering both developed and emerging markets
• Politically exposed person (PEP) lists, international sanctions lists and watchlists
• More than 26,000 current news sources from newspapers, blogs, and newswires, as well as an archive going back 40 years
• The LexisNexis® database of international court cases and decisions
• Risk analysis reports
• More than 500 biographical sources and executive profiles

With such comprehensive documents on the people and companies you target in this process, you can minimise threats and safeguard your business; increase your knowledge in critical business decisions; and most importantly, grow your business with confidence, conduct company searches.

Nexis® Entity Insight

In today’s international marketplace, global supply chains, partners, vendors and other business relationships increase your company’s exposure to threats. If you don’t have the proper information and insights into who you’re dealing with across this complex network of third parties, your company is vulnerable to reputational, regulatory, financial and strategic threats.

Nexis^® Entity Insight is a risk monitoring solution that lets you conduct ongoing risk media monitoring using a PESTLE (political, economic, socio-cultural, technological, legal and environmental) framework. This framework helps you identify supply-chain and third-party risks sooner. Entity Insight is a cost-effective, off-the-shelf tool that gives you access to premium content and enables customised risk scoring to empower your business. The tool’s risk management dashboard lets you quickly:

• Manage active and pending entities, as well as related RSS feeds
• Visualise news volume for all active entity mentions, colour-coded by PESTLE category
• Identify the top 10 news volume trends among active entities and risk topics
• Explore the context of adverse media mentions and mitigate emerging threats

Essentially, Entity Insight provides more visibility into your business risk and equips you with all the data you need to proactively make informed decisions before problems arise.

For more information on the due diligence process, check out our due diligence resources:

• The Nexis Diligence™Content Advantage: download now
• Get critical intelligence with help from Nexis Diligence: view our brochure
• Ultimate Beneficial Ownership Data: check it out
• Whitepaper: EU 5 AMLD: view our whitepaper
• Checklist: LexisNexis Due Diligence: view our full checklist
• Risk Mitigation Buyer's Guide: view our guide