Due Diligence in Business Relationships

Simply put, due diligence refers to the caution any reasonable person should exercise before undertaking any financial transaction or entering into any contract or agreement. Technology creates new mediums and avenues for doing business but it also creates new ways for unsuspecting persons to get duped. Accordingly, persons should always exercise extreme care and caution when entering into any new business transaction or relationship. Be it a long term relationship such as employment with a new company, or one time transactions like the sale/purchase of any item.

Enquire about the person/company you are seeking to transact business with

Thanks to globalisation and technological innovation, the world is now smaller than ever. Before you agree to any business arrangement, contractual relationship or one time transaction, be sure to look up the person/company on social media and any other networking applications such as: Facebook, LinkedIn, What’s App, Instagram, twitter and the like. Seek out any mutual acquaintances or person(s) that can testify to the identity and existence of the person with whom you wish to transact business.

If you are seeking to enter into a business relationship with a start-up or small and therefore not yet fully established business, then be sure to seek out any company reviews and recommendations on platforms such as Facebook and LinkedIn. Chances are, even if the company does not have its own website, it is likely to have a Facebook page at the very least thereby increasing the likelihood of finding someone you know that has experience with the company you wish to engage. If there is little or no digital or social media footprint of the company or individual you wish to transact business with, then you should proceed with extreme caution or rethink your desire to transact business with that company or individual altogether.


Verify the Identity of the Person or Company

So you found a strong digital footprint for the person/company you wish to transact business with; but how do you know that the person that exists digitally is the person that is seeking to enter into a business relationship with you? “Meet the Team” company pages with the names, titles, qualifications and pictures of company executives make it easier than ever for individuals with less than honourable intentions to masquerade as someone legitimate. Identity theft of the details of real individuals is not only very real but prevalent. Alternatively, anyone can create a fake email address, Facebook or other type of social media account to trick you into trusting and engaging with them. Accordingly, you should try to verify the identity of the person/company you seek to do business with.

The Companies Registry in your country is an excellent place to start. If the company you seek to do business with is not registered with the Companies Registry in your jurisdiction, then you should rethink your willingness to transact business with that company altogether. Please note also that while the company may be registered and in good legal standing, the person seeking to engage with you may not be. Anyone can claim to be a representative of any company without the company’s knowledge or approval. There have been many instances in which individuals have intentionally mislead others about their identity, standing or employment relationship with reputable organisations. Accordingly, before entering into any type of business relationship with someone unknown or someone you think is ‘well known’, take all reasonable steps to verify the real identity of that person.

Beware of Sketchy Addresses or Public Meeting Places

Always remember that anyone can give any address as their own whether the owner of the property is aware that their address is being misused or not. Unscrupulous individuals can then watch and wait for you and follow you with the intention of harming you. Accordingly, you should try to take every precaution to ensure that you verify the location or address before you leave the safety of your home.

Regardless, of the circumstances or reasons, anyone asking you to meet them at a ‘public place’ such as a restaurant, coffee shop or even near a popular landmark such as a shopping centre or roundabout, should set off some alarm bells/whistles in your head because after your meeting or exchange, the person can easily leave with your valuables never to be heard of again.

Alternatively, the person can arrange a meeting with you at an address that may not even be an actual address but an empty lot of land somewhere isolated. Tools and resources such as Waze, and or Google maps that provide satellite images of the meeting place can be invaluable. By ensuring that the exact address of the meeting place matches the address of the business as stated on its company documents, website and Facebook page is a great place to start. Use of a precise location pin may also be extremely helpful as a red flag if the individual/company cannot provide you with one but instead attempts to meet you at a random point to ‘take’ you to the office. At the very least, some very detailed directions can assist you in verifying the home or business address of the individual or the company location prior to your leaving home.

Always Beware of “Shady” Methods or Requests for Payments

If someone is offering you an opportunity such as a job or payment yet they require you to pay them (even a small fee) prior to the transaction, then you should not engage with the individual/company as this is the most common way that unsuspecting persons are ‘catfished’. Cash payments for large sums of money are an absolute NO NO! Remember that anyone can purchase a receipt book and give you a signed and stamped company or individual receipt. Cheques are a great form of payment if you are the person making the payment as it is its own form of receipt (the original cheque is mailed back to you by the bank).

Additionally, at the very least, knowledge of the person’s ‘legal name’ is required in order for you to write them a cheque unlike making a cash payment. If you are the recipient of a cheque, the person’s legal name and address are printed on the cheque itself unlike cash payments that provide absolutely no information whatsoever.

Requesting original receipts and or a written contract/agreement for items being purchased can assist in limiting the chances of purchasing stolen goods. Always beware of writing cheques to individuals representing companies instead of writing a cheque to the company itself. For big purchases such as a vehicle, a Manager’s cheque should be used in lieu of personal cheques for the protection of both the buyer and seller. The ease and accessibility of mobile banking makes bank/wire transfers more convenient than ever nowadays and should things go terribly wrong, also provides a starting point for tracing the funds and a basis for suspicious activity alerts than are just not possible with cash payments.

In Summary…

While no system or method is completely fool proof and someone dishonest may go the extra mile to deceive you, exercising due diligence and prudence ensures that you are not easily or effortlessly duped. In the unfortunate event that you are hoodwinked, should’ve, could’ve, would’ve feelings of regret are replaced by the peace of mind of knowing that you did everything you could have possibly done in order to uncover any deception the other party may have tried. The onus to protect yourself is yours alone. Proactivity in the form of prudence and due diligence, goes a long way to ensure that you are not taken advantage of. Simply put, in the eloquent expression of Thomas Fuller, ‘care and diligence bring luck.’



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