Due Diligence in Banking

11 July 2017

Following the announcement that four senior bankers at Barclays will be charged with fraud relating to the raising of funds to help the bank throughout the financial crisis in 2007. Regardless of the guilt or innocence of those charged, the media and public have large will naturally question the banking industry, its transparency and the regulatory bodies in place to stop and reduce the potential of crimes being committed. Banking regulation training, due diligence in the supply chain and overall structuring of debt will all be brought into question.

As corporate finance professionals, it is essential to ensure working to regulatory guidelines takes place within a financial establishment and that the use of banking training courses in line with business markets and needs is at the core of a business.

Due Diligence in Banking

An effective due diligence process is at the core of maintaining a strong reputation and legal working practices both within a financial institution but also within the supply chain as well.

Compliance can simply be improved by the use of training courses but also by adopting both pro-active working environments where employees can openly speak about miss-practice, as well as regulations or steps taken within a business before the completion of any transaction.

Within the consumer banking world the obvious example is the management of client details, as well as the legality of deals being carried out by clients – particularly high level and value transactions.

Anti-Money Laundering charges in the hundreds of millions have already been handed out to banks for consistent failings in managing clients, and there is a need to ensure banks stay ahead of criminals and within financial crime compliance.

Recent research from D&B shows 100% of financial institutions said third party tools benefitted the due diligence system, particularly in ensuring the information received on potential additions to a supply chain, or transactions in line to take place are in correct order.

Enhanced Due Diligence

Within the corporate finance industry there are areas presenting a need to carry out enhanced due diligence. These will be an area whereby the product or service at the core of the transaction is considered to be of greater risk – whereby the transaction presents an opportunity for money laundering or terrorist financing.

In these cases, it is advisable to carry out in-depth checks on individuals involved with transactions from the formation of a deeper understanding of business affairs, companies owned, previous transactions all the way through to adverse media representation.

For financial institutions, the due diligence check in this case should be in proportion to transaction at hand.

It is considered high risk transactions will also include:

  • Transactions where clients will not meet face to face
  • Dealing with a politically exposed individual
  • Cross border transactions in highly volatile global regions

Identifying the need for enhanced due diligence

The trigger of events within the transactional process could lead to the need for the due diligence process, these include:

  • A product or service change
  • The Validity of information
  • Any potential suspicion of money laundering
  • Questions about fraud are raised
  • Cybercrime risks increase

Further, any due diligence management process should be ongoing and part of banking training within a business. One of the needs is to monitor not only the business relationship between the banking party and the person being provided the product, but also to the parties surrounding the transaction. These could be third party business associates and relationships, as well as individuals associated with the core person involved with the transaction.

Part of this due diligence is a person screening of politically exposed individuals operating within areas that financial sanctions are in place, or have bene in place in the past.


Of course, documentation should be a core part of any due diligence process, with files also backed up in storage to ensure full records that due diligence, to the best of the ability, was taken place.

In the event of a transaction falling shy of AML or FCC as a result of actions from outside a banking establishment, it is possible to present this information in legal format is needed.

Banking Due Diligence Training

Ongoing businesses need to consider bespoke banking training courses to their business, that identify and solve the problems faced on a day-to-day and transaction-to-transaction basis. In short, this eradicates any potential opportunity for negligence within a business and ensures a culture of strong due diligence that meets regulations and ensures not only the financial, but legal success of a banking institution moving forward.


Redcliffe Training is a global banking finance training course provider aimed at professionals and using trainers currently working in the industry.

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