Third-Party Due Diligence: Bolstering Online Marketplaces Security


The technology enhances the online retailers’ marketplace. Various platforms proliferate in the digital world to streamline customer shopping experience. However, these make it convenient for individuals to sell or purchase anything worldwide. But this also increases the growing online shopping fraud, such as fake invoices, no-debit cards, fake products, and many more. To combat these regulatory bodies, third-party due diligence prevents marketplaces from various scams, including money laundering and terrorist financing.

This article teaches how to comply with third-party due diligence checklists and verify sellers efficiently.

What is Third-Party Due Diligence?

The online scams in the marketplace are increasing day by day. To combat fraud, the US regulatory body introduced the Inform Consumers Act. According to this law, now all marketplaces, including Amazon, Alibaba, eBay, and Etsy, have to verify the third-party sellers on their platforms. It ensures the identity of these sellers and informs buyers of their credibility. This also confirms if the product is real or fake, which the vendor is selling on the platform.

For compliance with the Inform Consumers Act, marketplace owners must verify the sellers’ identity. This can be only possible by third party due diligence. For that, they have to gather information according to their required demand and then verify this information. It ensures the actual founder of the business is not an illegal person selling authentic products.

Inform Consumers Act Requirements

Mainly, there are four Inform Act measurements that a marketplace can not overlook. Compliance with these can prevent them from financial crime and assist in avoiding hefty penalties.

  • To find the identity of the sellers by verifying their addresses, names, financial statements, ultimate beneficial owners, business registration numbers, industry licenses, or government documents.
  • All the sellers who have annual revenue of $20,000 must-have disclosed their verified address on the purchasing portal and also send buyers through the mail. The same information must be viewable on the history of customers purchasing.
  • Ensure products vendors are selling on the portal are not counterfeit or stolen. This will protect the customers and enhance the marketplace’s reputation.
  • Secure the customer and vendors’ confidential data and get permission from the buyers to collect their personal information.

How Third-Party Due Diligence Support in Compliance with Inform Consumers Act?

Vendor verification assists companies in complying with the US Inform Act by attesting the document and uncovering the hidden owners of the business. For the compliance process, the marketplace can follow the 3rd party due diligence steps given below:

Information collection

For vendor verification, companies must collect various information such as the registration number, business license, addresses, contact info, and others. The essential documents depend on the nature of the industry or product the vendor is selling. Marketplace can change the required documents according to the nature of the company they are onboarding.

Documents Verification

Companies have to verify the collected information, such as paper security features and written data. They cross-check the papers from original documents to ensure the information is not counterfeit and added up by the scammers to manipulate the data. They also attest to the security features such as fonts, signatures, borders, and others depending on the papers. Verifying these documents ensures that the vendor is original and exists in the real world.

Profile Screening

Once the vendor is verified, create its profile and screen against the watchlist sanctions. This will help the marketplace to ensure that third-party sellers are not criminals. To enhance due diligence, they must screen against the AML, PEPs, SIEs, or other government and international databases. National law enforcement agencies create and manage these watchlists to provide names of owners and companies involved in illicit activities.

Visualized Business Structure

The marketplace must centralize the company’s ownership structure to demonstrate vendors’ authenticity. Third-party due diligence provides this by creating a transparent structure in front of the marketplace, which they can use to show buyers. It establishes loyalty in the company before purchasing, directly increasing revenue. Additionally, it also helps to reduce the risk of fraud, as it allows buyers to perform a thorough investigation of the seller prior to the purchase. This can help to ensure that the buyer is getting what they are paying for.

In Conclusion

Third-party due diligence can generate accurate results for the marketplace to comply with the Inform Consumers Act. This ensures that online retailers verify their identity and combat money laundering. This also protects businesses from fake product suppliers in the initial step. It will directly increase the revenue of the marketplace and enhance brand loyalty. For adequate results, companies can use the automated business verification process, which reduces the time and cost of the marketplace. This also ensures that small businesses comply with international regulations to expand worldwide.


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