"Due diligence" is defined as an investigation of a person or business prior to contract signing, leasing, buying, selling, hiring or any act that requires a standard of care. It can be a legal obligation in certain countries and deals, but the term will more commonly apply to voluntary investigations. With the number and size of penalties increasing in the U.S, México and other countries in Latin
America, the Foreign Corrupt Practices Act (FCPA) for example is causing many U.S. institutions to look into how they evaluate all of their relationships overseas. The lack of a due diligence of a company's agents, vendors, and suppliers, as well as merger and acquisition partners in foreign countries could lead to doing business with an organization linked to a foreign official or state owned enterprises and their executives. This link could be perceived as leading to the bribing of the foreign officials and as a result lead to noncompliance with the FCPA. In México, the “Ley Contra el Lavado de Dinero” (LCLD – Anti Money Laundering Law) requires all transactions considered suspicious between, clients, customers, providers, sellers and buyers among others to be reported to the Mexican government. Performing a Due Diligence procedure can help save time and minimize the risk of incurring in dealings with any person or entity related to organized crime The “Ley Federal de Extinción 4e Dominio” (LFED) stipulates that if any illegal activities are performed within a property, the state may choose to seize ownership and employ the resources obtained to fight organized crime. Due diligence in regard to FCPA compliance is required in two aspects:
1. Initial due diligence – this step is necessary in evaluating what risk is involved in doing business with an entity or person prior to establishing a relationship and assesses risk at that point in time.
2. Ongoing due diligence – this is the process of periodically evaluating each relationship overseas or local to find links between current business relationships overseas and ties to a foreign official or illicit activities linked to corruption or organized crime. This process will be performed indefinitely as long as a relationship exists, and usually involves comparing the companies, executives and persons to several databases. This process should be performed on all relationships regardless of location and is often part of a wider Integrity and Risk Management initiative. Public & Private Databases. Law Enforcement Agencies. Local & International media. Politically exposed person databases. Level II
(Associates, Friends, Family or Owners)
Deep Social Network Scan. Web based Location. Social Engineering. Level III
(Extended Social and Business Circles)
Physical public registry and records search. (Not available electronically)
Field investigation. On site, social engineering.
