What is due diligence

Due diligence is a process that a bank must follow in order to be diligent and prudent. It is a series of concepts that are carried out when investigating an asset, investment or other business transactions.

Due diligence explained

Traditionally, due diligence is a procedure that is carried out by a bank or financial institution when investigating a certain issue. In order for a bank to agree to carry out financial activity, they must first do an initial, thorough investigation in order to be assured that the company or individual in question has the initial assets to carry out the activity, and that the information provided by the client is genuine.

Financial institutions and banks are required to carry out the due diligence procedure with regards to most of their financial business transactions. For example, when opening bank accounts of any nature, the bank needs to be certain that the information provided by the client in the application form is genuine. This is why most banks and financial institutions require the submission of additional documents during the application process.

In some circumstances, due diligence is a legal requirement that requires banks to be diligent before engaging in any business relationships or arrangements. The law requires that banks and financial companies act prudently and diligently and it is therefore necessary that they carry out due diligence.

It is advised to seek the assistance of professional consultants when carrying out this procedure as it is quite complex. To ensure that you comply with the relevant legislations in place, it is imperative that you follow the advice and guidance of experienced professionals in the field.