CISR85100 - CIS fraud measures: Due diligence and risk assessments: acting on the results

The important thing to remember is that merely making enquiries is not enough. The person must take appropriate action based on the results of those enquiries. Therefore, for example, if the person has undertaken effective due diligence/risk assessment on its subcontractors and that due diligence/risk assessment shows one or more of the following results in relation to the subcontractor/contractor:

  • contacted the person out-of-the-blue etconly been trading for a very short period of time,
  • managed to achieve a large income in that short period of time,
  • a poor credit rating,
  • contacted the person out-of-the-blue etc,

and yet the person still goes ahead and contracts with the subcontractor/contractor without making any further enquiries, this could lead to the conclusion that the due diligence / risk assessment was casually undertaken and of no value.

The above example, when considered alongside the circumstances of the transactions, could help to establish:

  1. that the person ‘knew’ of a connection with deliberate non-compliance, because they have merely gone through the motions of carrying out due diligence / risk assessment, with no real intention of acting on the results; and/or
  2. that the person ‘should have known’, because they had ignored indicators that should have led them to conclude that connection with deliberate non-compliance was the only reasonable explanation for the transactions being offered