An Industrial Guide To Create A Customer Due Diligence Checklist

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By Eva Adm


Customer due diligence is a critical component of any industrial business. It’s a way to ensure that potential customers are financially viable, free from legal or regulatory issues, and otherwise suitable for the company to do business with. Customer Due Diligence is carried out as a part of KYC (Know Your Customer) and AML (Anti-Money Laundering) norms.

While every business strives to implement a robust due diligence framework, it can be difficult to build one from scratch. This results in most businesses either creating a sub-par system or abandoning the process altogether.

Fortunately, we have compiled this industrial guide to create a customer due diligence checklist. This should help get started with building a comprehensive and customized due diligence system that meets the specific needs of the business.

Step 1: Verify Users

The first step in ensuring customer due diligence is to verify the identity of any potential customers. This can be done by confirming the names, addresses, contact numbers, and email addresses of the customers against historical data. If there is any discrepancy, then the customer should be flagged as suspicious and subjected to further due diligence.

Businesses can also use third-party services such as a credit bureau or identity verification service to verify the customer’s identity. This will allow them to check against a database of known fraudsters and reduce the risk of dealing with illegitimate customers.

Step 2: Store Data Securely

As per data privacy regulations, such as GDPR, customer data must be stored securely and not shared with any third parties. If businesses intend to share customer data with third parties, then they must obtain consent from the customer. Businesses must also ensure that the data is encrypted and stored in a secure environment. They must ensure that the data isn’t breached by unauthorized personnel or hackers.

Thus, the customer due diligence checklist should include steps to ensure that all customer data is stored securely and shared only with the relevant parties. Storing data securely will also help train algorithms and systems to detect fraud or suspicious activities.

Step 3: Calculate Risk And Exposure

Before doing business with a customer, businesses must assess the risk and exposure associated with them. This can be done by looking at their financial history, creditworthiness, and legal compliance.

For example, suppose a customer has a history of defaulting on payments or has been subject to legal proceedings. In such cases, the business should calculate its risk and exposure associated with the person before taking them on as a customer.

Step 4: Develop a Customer Persona

The customer due diligence checklist should also include steps to create a detailed customer persona. This will help businesses understand the needs and interests of their customers better and, thus, target them more effectively.

The customer persona should include information about the customer’s age, interests, lifestyle choices, purchasing habits, and preferences. This information can then be used to create customized campaigns that are more likely to result in conversions.

Step 5: Implement Necessary Supplementary Actions

The customer due diligence checklist must also include any necessary supplementary actions. This could include conducting third-party checks, such as background checks and criminal records checks. This helps ensure the customer is who they say they are.

Businesses should also conduct continuous due diligence and regularly review customer data. This makes sure that there have been no changes to the customer’s profile. This will help ensure that any suspicious activities are detected early and addressed promptly.

Step 6: Be Audit Ready

The last step in the customer due diligence checklist is to ensure that the business is audit-ready. This means that all customer data must be securely stored and documented correctly. This way, businesses will be able to produce this information on demand if required by an auditor. It also ensures that the data is easily accessible and can be quickly retrieved in the event of an investigation.

By following these steps, businesses can create a comprehensive customer due diligence checklist.

Wrapping Up

Customer due diligence is an important process that can help businesses prevent illegal activities, including fraud, trafficking, and money laundering. The checklist discussed above can help businesses create a robust due diligence process. This will help protect businesses from any legal or financial repercussions that they could face if they fail to conduct due diligence properly. Moreover, it will also build trust with customers and provide a better customer experience.

So, make sure to create a customer due diligence checklist today!