Due diligence is an important procedure that allows businesses to make informed decisions and reduce risks. It covers financial, legal and commercial concerns. Due diligence may include aspects such as a company’s concentration of customers, the existence or legal or regulatory disputes and the extent to which intellectual property has been created.

One of the main components of due diligence is fact verification, a careful method of checking the authenticity of information to ensure it’s genuine and authentic. This involves looking over documents, cross-checking information and verifying the identity of any parties.

A company should periodically update its due diligence on ongoing activities, projects, and business partners. The frequency of these updates varies on the level risk of the country, project, or business associate. In high-risk regions it might be necessary to review due diligence at least once every two years.

Enhanced due diligence (EDD) is more extensive than basic CDD and identifies warning signs such as the presence of politically exposed persons (PEPs) or the history of money laundering and corruption. This could involve screening against lists of PEPs compiled by law enforcement agencies, such as the U.S. Federal Bureau of Investigation and the UK National Crime Agency.

EDD also requires identifying the scope of the relationship as well as any involvement by a third party, for instance, a supplier who interacts with customers within a particular jurisdiction would need to be scrutinized more closely than an employee of data room index a client firm. Companies should also review regularly their own due diligence results and decide to take action if they find that there are new or greater risks.