Due diligence and KYS – How to secure your supply chain against compliance risks?

Contents

Third-party risks: corruption, money laundering, sanctions
Due diligence vs. KYS: what are the differences?
Key steps to securing your supply chain
Automating vigilance with RegTech
Securing your supply chain for the long term with KYS and RegTech

Compliance policies often focus on customers and financial flows, through KYC (Know Your Customer) or KYB (Know Your Business). However, the supply chain is still too often overlooked. Every supplier, carrier, or subcontractor can become a point of entry for corruption, money laundering, or violations of international sanctions. 

According to the 2024 report bythe OECD(Organization for Economic Cooperation and Development):  

“The risks of corruption are high in sustainable sourcing of materials and throughout the supply chain.” 

This observation highlights a major blind spot in compliance: the supply chain, where controls are still too uneven and rarely automated. 

KYS (Know Your Supplier) fills this gap by identifying and assessing the risks associated with business partners throughout the network. 

By combining the principles of due diligence and risk mapping, compliance teams can identify weak signals before they compromise operational performance or the company's reputation. 

Third-party risks: corruption, money laundering, sanctions 

Each link in the logistics chain represents a potential risk. In a globalized supply chain, the proliferation of subcontractors and the diversity of legal frameworks complicate control management. Without rigorous third-party assessment, compliance becomes fragile. 

Corruption remains the primary risk. It often creeps in via local agents or poorly identified intermediaries. A simple subcontract can conceal illegal practices, particularly in public tenders or international markets. 

Money laundering is another major threat. Shell subsidiaries or opaque cross-border flows can conceal funds of dubious origin, jeopardizing the company's reputation and financial stability. 

Finally, failure to comply with international sanctions (UN, EU, OFAC) exposes organizations to severe fines and lasting loss of trust. 

The European Union strictly regulates thefight against money laundering(AML) and terrorist financing, as well as corruption, emphasizing the need for continuous vigilance with regard to each partner. 

Due diligence vs. KYS: what are the differences? 

Due diligence involves collecting and analyzing information about a third party in order to assess its integrity, financial strength, and regulatory compliance. This process applies to all types of business relationships: customers, partners, or suppliers. 

KYS focuses this vigilance on the supply chain. Whereas KYC verifies a customer's identity, KYS analyzes the reliability, reputation, and compliance risks associated with a supplier. This third-party assessment includes the detection of sensitive profiles such as PEP, in order to prevent the risks of corruption or conflicts of interest. 

Combined, KYC, KYB, and KYS provide a 360° view of third parties. This integrated approach enhances the traceability and consistency of the controls required by regulators and ensures continuous vigilance throughout the supply chain. 

Key steps to securing your supply chain 

A policyof optimizing due diligenceis based on a rigorous and structured methodology: 

1. Third-party risk mapping: identifying areas of high exposure (sensitive countries, types of suppliers, contract amounts) 

2. Data collection: extract relevant legal, financial, and reputational information 

3. Assessment: Classify third parties according to their level of risk 

4. Control documentation: archive evidence of compliance, questionnaires, and audit reports 

5. Continuous monitoring: perform regular updates 

This structured approach makes it possible to demonstrate compliance during audits and anticipate reputational crises. 

Automating vigilance with RegTech 

When supplier networks include thousands of players, manual monitoring becomes impossible. This is where RegTech comes into its own. 

Technological efficiency at the service of compliance 

AP Solutions IO's solutions enable large-scale automation and optimization of due diligence and KYS. Their modular suite covers every stage of the control process: 

• AP Scan: detection of entities on sanction lists, PEPs, and negative media 

• AP Monitoring: continuous monitoring and instant alerts in the event of new risks 

• AP Scoring: calculating an integrity score to prioritize verification priorities 

Thanks to this integrated approach, compliance departments can make their controls more reliable while reducing operating costs. 

The expertise of AP Solutions IO 

Regulatory expertise: in-depth knowledge of AML-CFT, Sapin 2, and GDPR frameworks, applied to each sector of activity 

Technological excellence: modular RegTech solutions based on automation, data analysis, and traceability of controls 

The company supports its clients in implementing customized compliance programs tailored to their specific volumes and risks. 

This combination of expertise and automation makes it possible to build an ethical, sustainable supply chain that is aligned with European requirements. 

Securing your supply chain for the long term with KYS and RegTech 

With the proliferation of partners and the complexity of global flows, compliance can no longer be limited to KYC. The issue is clear: how can constant vigilance be guaranteed without hindering operational efficiency? 

The combination of KYS and due diligence addresses this challenge. It provides a comprehensive view of third parties, anticipates the risks of corruption or money laundering, and enhances the transparency required by authorities (AML). By leveraging RegTech, this approach becomes fluid, measurable, and integrated into every link in the supply chain. 

With AP Solutions IO, compliance becomes a performance driver 

• Automated 

• Documented 

• Scalable