Integrity Due Diligence A Must Exercise

Absence of a true system can lead to issues that banks face today, feels Deepak Bhawnani, CEO, Alea Consulting, which specializes in reputation risk and corporate investigations:

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N. Mohan: What is integrity due diligence and its relevance in the banking and financial services sector?

Deepak Bhawnani: There are various types of due diligence exercises conducted prior to a business association. The three key ones are legal, financial and integrity. All three encompass a comprehensive assessment of the potential business partner or lender. Integrity due diligence focuses on reputation risks and entails investigating information regarding regulatory compliance, source of funds, corporate governance, political exposure, sanctions and blacklists, i.e. issues that, by association, can adversely impact the financial institution’s brand integrity. An integrity due diligence is imperative to the BFSI sector. One main reason ascribed to accumulation of bad loans is lack of adequate due diligence.

Do you think the concept has caught the attention of the Indian bankers?

In private sector banks, certainly. I cannot, however, say the same for public sector banks.

Is customer due diligence a norm in good banking practices? Is not KYC sufficient?