31 Days to More Effective Compliance Programs - Day 18 - Levels of Due Diligence

Thomas Fox - Compliance Evangelist
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Due diligence is generally recognized in Level I, Level II, and Level III levels. Each Level is appropriate for a different level of corruption risk. The key is to develop a mechanism to determine the appropriate level of due diligence and then implement that going forward.

There are many different approaches to the specifics of due diligence. You can craft the relevant portions into your program by laying out some of the approaches. The See more +

Due diligence is generally recognized in Level I, Level II, and Level III levels. Each Level is appropriate for a different level of corruption risk. The key is to develop a mechanism to determine the appropriate level of due diligence and then implement that going forward.

There are many different approaches to the specifics of due diligence. You can craft the relevant portions into your program by laying out some of the approaches. The Level I, II, and III trichotomies appear to have the greatest favor and one that you should implement straightforwardly. But the key is that you must assess your company’s risk and then manage that risk. If you need to perform additional due diligence to answer questions or clear red flags, you should do so. And do not forget to “Document, Document, and Document” all your due diligence.

Three key takeaways:

1. A Level I due to diligence should only be used with a low risk of corruption.

2. A Level II due diligence is sufficient in a high-risk jurisdiction if no red flags are to be cleared.

3. Level III due diligence is deep-dive, boots-on-the-ground investigation. See less -

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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