Expert section
Counterparty due diligence: what can lawfully be known before a deal
“Check the counterparty” sounds like a technical procedure, but the decision is made not on the fact of the check — it is made on what the check showed and on what it could not show.
What a lawful check gives you
A lawful check relies on open and lawfully accessible sources: registration and ownership records, publications, court and enforcement data, and the company's own materials. That shows three things.
- Whether the counterparty exists in the form it describes.
- Whether it has a history of unmet obligations and disputes.
- Whether what it says about itself matches independent sources.
The third point usually matters more than the first two. A dispute on its own proves nothing — reputable companies litigate too. A gap between the stated and the verifiable, however, almost always means the conversation is not about what you think it is about.
What a check does not give you
A check does not guarantee performance. It describes the state of the sources checked as at the date of the check, and nothing more. A company with an immaculate record may default tomorrow; a company with disputes may perform perfectly.
One thing is worth stating separately: what a lawful check never includes. Nobody working within the law provides access to banking secrecy, correspondence, phone contents or closed databases. An offer to obtain such material is a sign that the risk is being transferred to you — using unlawfully obtained data creates the problem for the client.
Turning a check into a decision
A check is useful when it changes the terms of the deal. An identified risk rarely means “do not proceed”; more often it means “proceed differently”.
- Change the payment structure: smaller advance, staged payment, security.
- Add control points: verification on dispatch, independent acceptance.
- Reduce the size of the first transaction and watch performance.
- Put in the contract what was only a promise in the conversation.
When to check
Before the money moves and before the goods ship. Afterwards it is no longer due diligence but an assessment of recovery prospects — more expensive, and worth less.
Sources
- Bureau RM practice in counterparty due diligence and fact-finding. General information only.