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Media

What is Due Diligence?

Matthew Warner | October 2020

Due Diligence is generally defined as the process of research and analysis carried out by a person or business before engaging in some form of transaction or interaction. In the world of KYC and onboarding, due diligence usually refers specifically to the process of collating and evaluating information on potential users in regards to their possible involvement with criminal activity such as money laundering and terrorism finance. Essentially, it is an integral part of the KYC process.

Due diligence, as part of the KYC process, is required by regulations around the world, although the exact measures and parameters that are set by regulators in different jurisdictions can differ slightly. In many jurisdictions the process will involve establishing and verifying the customer’s name, date of birth, address, contact details, nationality and signature. In some cases, particularly where a customer will be dealing with values of transactions below a certain threshold, there will be even simple steps to take in order to assess a customer’s risk and approve their suitability to use the services on offer. Once these have been established and accepted and no link to illicit activity is found, the user can be onboarded and access services. 

 

In some instances, there may be complications and additions to the due diligence process. Enhanced Due Diligence can come into play for a number of reasons, but most notably when a user is identified as being ‘Politically Exposed’, or if a user is not physically present for the process. This situation will invariably lead to the requirement of further information, which could include national ID numbers, photographic evidence of the user’s identity and their ownership of it, and various other measures which can change based on the jurisdiction.   

 

Though conducting due diligence is an integral part of KYC and necessary to ensure only honest people are part of the system, it does have its drawbacks. The most notable issue with due diligence is the logistics and effort required to collect and verify users’ data against the variety of lists, particularly when users and services may cross jurisdictional boundaries. With traditional options, this process needs to be carried out whenever a person signs up for a service where KYC is required, even if they have undergone the process before with another company. It also takes time for these due diligence checks to take place, which can be a real issue for people looking at time-sensitive options. An additional issue arises when the documentation a person has provided for the due diligence process changes, for example, when someone changes their name or address – each service or business needs to be updated separately. 

 

This is where Blockpass’ revolutionary KYC Connect solution comes into its own. By creating a user-centric verification tool where an individual can build their identity and have it certified as verified beforehand, it ensures that the user can onboard almost instantly to any number of services without having to fill out the same forms and wait for the same verification process each time. It also means that when their information is updated, a user only needs to change the information on their profile once before sharing it instantly with any service they have signed up to which requires it. All of this makes a more simple and efficient process for user and merchant alike with the waiting, cost and repetition removed.

 

The Blockpass platform is fully automated and hosted in the cloud, with no integration or setup fee. Businesses can sign up to the KYC Connect console in a matter of minutes, test out the service, and start conducting identity documents verification, KYC and AML checks. Sign up for FREE at console.blockpass.org.