Due Diligence Policy Template for South Africa

A Due Diligence Policy sets out how an organization investigates and evaluates potential business relationships, investments, or transactions before committing to them. In South Africa, these policies help companies comply with laws like the Financial Intelligence Centre Act (FICA) and the Companies Act while protecting themselves from risks and fraud.

Good due diligence policies outline specific steps for verifying information about business partners, checking their financial health, and spotting red flags. They're especially important for South African firms dealing with anti-money laundering requirements, B-BBEE verification, and cross-border transactions. The policy guides staff on what to check, which documents to gather, and how to report their findings.

You need a Due Diligence Policy before entering any significant business relationships or transactions in South Africa. This includes mergers and acquisitions, taking on new suppliers, forming partnerships, or investing in other companies. The policy becomes essential when dealing with high-value contracts, international trade partners, or any situation where thorough background checks are crucial.

The timing often aligns with regulatory requirements - like when registering as an accountable institution under FICA, starting B-BBEE verification processes, or expanding into regulated sectors. Having this policy ready before these moments helps avoid delays, protect your company from fraud, and demonstrate good corporate governance to stakeholders and regulators.

• Basic Financial Due Diligence Policy: Focuses on verifying financial health, credit history, and tax compliance - essential for partnerships and investments
• Legal and Regulatory Due Diligence Policy: Covers compliance checks, licensing, and regulatory standings under South African law
• B-BBEE Due Diligence Policy: Specifically designed for verifying B-BBEE status, ownership structures, and transformation credentials
• Environmental and Social Due Diligence Policy: Examines environmental compliance, social impact, and sustainability practices
• Operational Due Diligence Policy: Evaluates business operations, systems, and processes, particularly important in mergers and acquisitions

• Board of Directors: Approve and oversee Due Diligence Policies, ensuring they align with company strategy and risk appetite
• Compliance Officers: Draft, implement, and monitor the policy's effectiveness, especially regarding FICA and other regulatory requirements
• Legal Teams: Review and update policies to ensure alignment with South African laws and regulations
• Risk Management Teams: Apply the policy during assessments and investigations of potential business relationships
• Department Managers: Execute due diligence procedures within their areas and report findings to senior management
• External Auditors: Evaluate the policy's implementation and effectiveness during compliance reviews

• Risk Assessment: Map out your organization's specific risk areas, industry requirements, and regulatory obligations under South African law
• Regulatory Review: Gather current FICA, B-BBEE, and Companies Act requirements that affect your due diligence processes
• Process Mapping: Document your existing verification procedures and identify gaps or inefficiencies
• Stakeholder Input: Collect feedback from compliance, legal, and operations teams about practical challenges
• Resource Planning: Determine who will conduct due diligence tasks and what tools they'll need
• Documentation Standards: Establish clear templates and checklists for consistency across departments

• Purpose and Scope: Clear statement of policy objectives and which business activities require due diligence
• Legal Framework: References to FICA, Companies Act, and other relevant South African legislation
• Risk Assessment Criteria: Specific factors and red flags to evaluate during due diligence processes
• Verification Procedures: Step-by-step methods for confirming identity, ownership, and compliance status
• Documentation Requirements: List of mandatory documents and records to be collected and retained
• Roles and Responsibilities: Clear designation of who performs and oversees due diligence tasks
• Review and Update Process: Procedures for regular policy updates and compliance monitoring

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.

• Framework vs Tool: The policy establishes your organization's overarching principles and procedures for conducting due diligence, while the checklist is a practical tool used to execute those procedures
• Permanence: The policy is a lasting document that requires formal approval and periodic reviews, whereas checklists are operational tools that can be modified for specific transactions
• Legal Standing: Your policy demonstrates regulatory compliance and governance commitment, while checklists serve as evidence that proper procedures were followed
• Scope of Content: The policy covers principles, responsibilities, and procedures broadly, while checklists detail specific items to verify during individual due diligence exercises