Due Diligence Policy Template for England and Wales

A Due Diligence Policy sets out how an organization investigates and evaluates potential business partners, investments, or transactions before committing to them. It guides staff through the essential checks needed to spot risks, verify claims, and ensure compliance with UK laws like the Bribery Act 2010 and Money Laundering Regulations.

These policies typically outline specific steps teams must follow - from basic identity checks to detailed financial reviews. They help protect companies from fraud, reputational damage, and legal problems by creating a clear, documented process for vetting new relationships. Good policies also specify who's responsible for different checks, what evidence to gather, and when to escalate concerns.

Consider implementing a Due Diligence Policy when your organization plans to enter new business relationships, make significant investments, or acquire other companies. It's particularly crucial before mergers, joint ventures, or when engaging with overseas suppliers where UK anti-money laundering and bribery laws apply.

The policy becomes essential during high-stakes decisions that could impact your company's legal standing or reputation. For example, when taking on major contracts, partnering with new distributors, or expanding into unfamiliar markets. Financial institutions and regulated businesses often need these policies to satisfy FCA requirements and demonstrate compliance with UK regulatory frameworks.

• Basic compliance policies for small businesses that focus on essential identity and financial checks
• Enhanced due diligence frameworks used by financial institutions, with detailed anti-money laundering provisions
• Merger and acquisition policies that emphasize thorough financial and legal investigation of target companies
• Supply chain due diligence policies focusing on modern slavery compliance and ethical trading standards
• Investment-focused policies used by private equity firms and institutional investors for comprehensive risk assessment

• Compliance Officers: Lead the development and implementation of Due Diligence Policies, ensuring they meet UK regulatory requirements
• Legal Teams: Draft and review policies, provide guidance on legal obligations, and update procedures as regulations change
• Senior Management: Approve policies, allocate resources, and bear ultimate responsibility for due diligence effectiveness
• Department Heads: Implement policy requirements within their teams and report on compliance
• External Auditors: Review policy implementation and effectiveness as part of broader compliance assessments

• Risk Assessment: Map out your organization's specific risk areas and regulatory obligations under UK law
• Industry Standards: Research sector-specific due diligence requirements and common practices in your field
• Process Mapping: Document existing due diligence workflows and identify gaps or inefficiencies
• Stakeholder Input: Gather feedback from compliance, legal, and operational teams on practical challenges
• Resource Planning: Determine who will conduct checks, what tools they need, and required training
• Documentation Requirements: Establish clear record-keeping standards that satisfy UK regulatory expectations

• Purpose Statement: Clear objectives and scope of due diligence activities under UK law
• Risk Assessment Framework: Structured approach to identifying and evaluating potential risks
• Verification Procedures: Specific steps for identity checks, financial reviews, and background screening
• Data Protection Controls: GDPR-compliant processes for handling sensitive information
• Escalation Protocol: Clear procedures for handling red flags and concerns
• Record Keeping Requirements: Documentation standards meeting UK regulatory expectations
• Review and Update Process: Schedule for policy evaluation and revision

A Due Diligence Policy differs significantly from a Due Diligence Checklist in both scope and function. While they work together, each serves a distinct purpose in your organization's risk management framework.

• Strategic vs Tactical: The policy sets out your organization's overall approach and requirements for due diligence, while a checklist is the practical tool used to execute specific investigations
• Permanence: A policy is a lasting document that establishes governance standards, whereas checklists are transaction-specific tools that get completed and filed
• Audience Focus: Policies guide decision-makers and compliance teams on procedures and responsibilities, while checklists help operational staff complete specific due diligence tasks
• Legal Standing: The policy forms part of your corporate governance framework, but checklists serve as evidence that proper procedures were followed