Checks on Directors- Why is it so important?

29 Dec Checks on Directors- Why is it so important?

Performing due diligence prior to doing business with any organization is both an essential and crucial exercise and enterprises today should be aware of the behaviour of companies they are dealing with to be able to forecast their cash flows.

One can get insights into an organization by probably doing some secondary research like viewing their website, conducting a news search, etc., however, to get deeper insights one needs to refer to the company documents such as Memorandum of association, share registry and directors registry etc.

All of these, the information on the directors is crucial as they take control on the day to day decisions of the company and help you gauge the operations of the company. So let’s look at some fundamental reasons for performing a search on directors

1. Directors are principal persons within an organization, whether big or small doesn’t matter

Small companies have a limited number of directors whereas bigger organizations have a board and in both, the cases the directors have extensive powers and control the direction of the company. They form the long-term goals of the company and play a major role in executing the same. Hence if the moral and ethics of someone in that role are not good it might hit the operations and finance of the organization.

2. Disqualified Directors

Directors involved in criminal activities are disqualified and its prohibited by law to deal with any directors who are disqualified, so it is mandatory to check for the legitimacy of directors.

Hence it is important to dig through the past and present of the director and if the director has been part of various failed ventures then there could be a pattern of poor management which might need further due diligence and this is critical for making the most informed decisions about whether or not to do business with an organization. Now comes the million-dollar question i.e. where do the compliance teams find the information on the directors and how to perform due diligence checks?

Today compliance teams have data-driven solutions to speed and simplify the process of finding crucial information, such as details of the directors. And one such solution is the KYC Lookup search engine which has access to over 100 million company records from more than 110 jurisdictions around the world.

The solution enables real-time identification and verification of company records through official registries. Using the unique company registration number, the KYC Lookup API pulls the data of the respective entity and the details of the company such as full legal name, date of incorporation, registered address and a link to the specific company registry are made available.

Further steps of due diligence

Once the details on the directors are available from KYCLookup, the next step would be to gather their valid identity and verification documents such as passport or driving license etc. and these requirements might vary from one financial institution to other depending on their risk appetite, but to be very generic it is recommended to collect the information on all the directors if it’s a small firm and in case of bigger firms collect information on directors who have the signing authority.

Next step is to run the names of directors against a comprehensive set of watch lists and for the screening program to be effective the watch lists database should extend global coverage and cover lists from all the relevant sanctioning and law enforcement agencies and keep it monitoring further for any changes.

To learn more about KYC Lookup, please do visit the link below and get a feel of how we simplify the information retrieval process.

KYC Lookup – Company Search Engine