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Top 5 Best Practices of Corporate Due Diligence

Statistics of Identity Theft Resource Center for the year 2024 demonstrated that a record-breaking number of identity theft happened in 2023 which was the primary factor behind highly concentrated identity thefts in 2024. Consequently, the development of such technologies will allow biometric identification services to identify people even if they claim to be older than that by providing additional information regarding their true identity.

After careful consideration of the newly discovered stats, what is  corporate due diligence still remain unknown to many  Corporate due diligence is defined as the process of “ in-depth and review and analysis of the business partner you are planning to onboard to avoid any legal or financial repercussions that may emerge in response of partnering with them” 

The adverse impacts of choosing the wrong business to partner with are far more damaging than reputational damage alone. Businesses that run as top leaders of the industry end up striving for their survival. 

How to maintain corporate due diligence in 2024?

2024 is the high time for businesses to converge on agreed upon measures of KYB for the corporate sector. KYB not only facilitates prompt detection of risks, but also assists with informed decision making for smooth business onboarding. 

Having said that, I know what concerns business entities the most! How to ensure compliance when regulations are being highly dynamic. 

Considering the dynamic nature of KYB regulations for business entities, this blog will be your comprehensive guide to the top five best practices of corporate due diligence in 2024. 

Top 5 Best Practices of Corporate Due Diligence

In a highly interconnected world, where businesses are going global and transcends the boundaries, KYB serves as the vital component in drawing boundaries between credible and corrupt business practices. 

Here is what you can do to empower KYB solutions across the corporate world. 

  1. Background Evaluation: 

A research study reveals that 60% of the businesses suffer due to financial crime in 2023, necessitating the crucial need to conduct background evaluation of business entities. 

One of the core strategies of corporate due diligence checklist is to deeply look into the background of each business, revealing details including the owner and credibility of the business in the market space and other regulatory bodies overseeing the compliance status among corporate entities. 

  1. Verify the Ultimate Beneficial Ownership 

When it comes to KYB, businesses are what comes across the mind of readers. However, the credibility of ultimate beneficial owners remind even more pivotal to complete the process of complying with global KYB requirements. 

As per the recent survey, 84% of the compliance professionals consider screening ultimate beneficial owners as an important part of KYB process. 

The 2020 revelations of FinCEN declared how major banks suffered as a result of their negligence towards verifying the ultimate beneficial ownership of companies they readily onboarded, resulting in billions of dollars lost to fraud and money laundering. 

  1. Keep Pace with Dynamic Regulations 

Despite operating in the same niche, KYB regulations for financial institutions may vary as compared to the gaming sector. Likewise, the region and jurisdiction within which a business operates hold significance. 

The global giant of the financial world, Commonwealth Bank of Australian was fined in 2018 for its lack of compliance with AML regulations as it accompanied the difficulties that it can lead the business to.

  1. Ongoing Due Diligence Process 

Banks, other financial institutions and even businesses should be very cautious of frauds that are conducted using the basic verification carried out as part of the onboarding process since these could lead to financial and reputational repercussions.

A fact to know! 

Along with constantly dynamic regulations, risk levels among businesses are even more dynamic. A business at risk level 4 may rise up to level1 as soon as the beneficial owner is charged with sanctions or other legal charges. 

Keeping a consistent and watchful eye out for dynamic changes within the structure of a business is vital for prompt detection of risk as soon as they emerge. 

  1. Automated Corporate Due Diligence 

Last but definitely not least, the best advancement of 2024 is to invest in automating the corporate finance due diligence process. With millions of businesses entering corporate directories, it has become nearly impossible to keep track of each case and the multiple progressions they might have made from their origin to the present. 

A risk-based approach to onboarding a business automatically drills down to the high-risk business ventures, making visibility into more relevant and potential corporate entities more vivid. 

Are there any more advancements to expect in 2024?

While it cannot be explicitly stated, there are high hopes associated with more advancements to come in 2024. This primarily includes more technology use to counter AI-driven strategies of fostering identity theft in the global business landscape. 

Another major advancement revolves around strict regulatory requirements of KYB to actively detect deceptive tricks of bad actors.

Key Takeaway

Despite the astonishing advancements in the field of technology and AI, corporate due diligence still remains a challenge in terms of KYB verification. However, these 5 strategies could define the roadmap for top-tier corporate due diligence services.

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