Is Simplified Due Diligence Sufficient? - Idenfo Direct MENA

Is Simplified Due Diligence Sufficient?

When attempting to verify the individuals your company is onboarding, KYC softwares are crucial to the process of carrying out sufficient due diligence. There are three different types; simplified due diligence, standard due diligence and enhanced due diligence, each requires different levels of identity verification and background checks. In this blog, whether or not a company can solely utilise simplified due diligence and its efficiency level will be discussed.

Simplified due diligence is the lowest level of due diligence and its process is extremely different to that of standard and enhanced due diligence. Once it’s clear that the individual falls into the category of SDD, the next step is not to verify the identity of the individual as you would with the other types. Rather it focuses on only monitoring the relationship for risky or triggered events that may warrant further investigation or a higher level of due diligence. The simplified form of due diligence is applicable mostly when the company can prove that the possibility of money laundering or terrorist financing is low. It doesn’t require any customer screening processes because it is used to identify mostly harmless customers after a complete risk assessment has taken place to come to this conclusion. 

Though, it is important to acknowledge that there is almost nobody that can be truly sure. That can guarantee the lack of risk present when onboarding someone new. Therefore, it is believed to be the safest and smartest option to always opt for the highest and most thorough form of due diligence. Fully understanding a client’s risk to your business is impossible, the more thorough the check, the more the company knows about the client. This will lead to the smoothest onboarding process possible. 

Simplified due diligence may not be the most efficient form of background checking but it still has several uses, all depending upon two factors. There are certain ways to determine whether a client is low risk or not. Firstly, the service that is being requested from the company, if the service that is being requested is high stakes, like for example purchasing property, that requires a higher level of due diligence. Then there is the type of client, if it is an individual client, they tend to be lower risk whereas someone representing a company or a business needs to be looked into further. The situation of clients needs to be closely monitored because further due diligence could be required at any given time. 

The best way to eliminate risk is to be as thorough as possible, always verify and look into any potential clients. This may seem tedious and time consuming especially when time is of the essence in so many crucial deals. With a software like Idenfo, though, the process is automated, quick, more efficient than a human and also reduces the cost of such checks greatly. 

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