AI vendor due diligence uses software agents to confirm a vendor’s legal entity, screen sanctions, debarment, enforcement and insolvency records, gather financial, cyber and regulatory evidence with source dates, extract contract terms and map findings to the institution’s controls, while bank staff decide whether to approve the relationship and record why.
What follows covers the agent’s scope, its seven steps, a table splitting due diligence factors between agent and analyst, what the agencies expect and how Ask Kaia agents apply the method.
What an AI Agent Does in Vendor Due Diligence and What It Does Not
In due diligence, an AI agent gathers, organizes and dates evidence about a prospective or existing vendor. The decisions to approve the relationship or negotiate the contract stay with the bank or credit union, and the 2023 Interagency Guidance on Third-Party Relationships states that a banking organization’s use of third parties does not diminish its responsibility to meet legal and regulatory requirements.
The work applies at two points in the life cycle:
- Pre-contract due diligence
- The refresh before renewal
A vendor with access to customer data or supporting a critical activity warrants fuller review than a low-risk supplier, and the institution’s red flags and escalation paths decide what happens when the agent surfaces an adverse finding.
How AI Vendor Due Diligence Works in Seven Steps
1. Resolve the legal entity
Start from the vendor’s web domain, confirm the registered legal entity behind it and flag ambiguous matches for a person to confirm.
2. Set criticality and data access
Record the activity the vendor supports and the customer data it can reach, so the depth of review matches the institution’s risk rating.
3. Screen
Run sanctions screening, federal debarment, active enforcement and insolvency checks, keeping a link to each supporting record.
4. Gather sourced intelligence
Collect corporate, financial, cyber, regulatory and reputation information, with the source, retrieval date and any missing item shown beside each finding.
5. Extract contract terms
Pull service commitments, audit rights, data-return and termination clauses from the draft or existing contract.
6. Map evidence to controls
Compare findings with the institution’s control requirements and list the gaps that need follow-up.
7. Record limitations and the decision
The analyst records what could not be obtained, the conclusion and the rationale.
Steps 1 through 6 are where third party risk management automation applies, and due diligence software already handles parts of them. An agent links the steps, refreshes them and shows how current each item is.
Due Diligence Factors: Agent Work and Analyst Decisions
The 2023 interagency guidance lists 14 due diligence factors. Six of them show where an AI vendor risk assessment can assemble evidence and where judgment stays with the analyst.
| Due diligence factor | What an AI agent can assemble | What the analyst decides |
|---|---|---|
| Legal and regulatory compliance | Ownership structure, OFAC sanctions screening results, enforcement actions and licensing records, each with source and date | Whether a match is a true hit and whether past compliance problems were resolved |
| Financial condition | Audited statements, annual reports and SEC filings where available, plus insolvency findings | Whether the vendor has the financial capability and stability to perform the activity |
| Information security | Disclosed incidents, security attestations on file and gaps against the institution’s controls | Whether the gaps are acceptable or need contract terms or compensating controls |
| Operational resilience | Business continuity documents, disclosed outages and shared-provider dependencies | Whether the vendor can support the activity through a disruption |
| Reliance on subcontractors | Named subcontractors and shared providers across the vendor inventory | Whether fourth-party concentration needs board reporting or an alternative |
| Contractual arrangements | Extracted service levels, audit rights, data-return and exit terms | Whether the terms are adequate and what to negotiate |
What the Guidance Expects When Technology Assists Due Diligence
Under the 2023 interagency guidance, the scope and degree of due diligence should be commensurate with the level of risk and complexity of the relationship. The guidance recognizes that a banking organization may not be able to obtain the information it wants and expects it to identify and document the limitations of its due diligence and consider alternatives.
The September 2026 proposal to replace that guidance, issued by the Federal Reserve, FDIC, NCUA and OCC on 11 September 2026, would let banking organizations rely on sufficient supplemental sources where a third party is unwilling or unable to provide information. The agencies also encourage the use of technology for effective third-party oversight, where appropriate. The proposal is not final as of publishing this article.
Ask Kaia Agents for Vendor Due Diligence
The Ask Kaia Third-Party Risk Intelligence Agent confirms a vendor’s legal entity from its domain, screens sanctions, federal debarment, active enforcement and insolvency, and shows source dates, confidence and missing information.
It extracts contract terms, maps evidence to controls and requires human approval for recommendations. Its due-diligence record keeps findings, analyst decisions and documented limitations, so examiners see the evidence and the judgment separately.
Frequently Asked Questions
Can an AI Agent Replace Vendor Due Diligence Questionnaires?
No. Questionnaires collect information only the vendor holds, such as internal controls, subcontractor lists and incident history, and an agent adds outside evidence and checks the answers against it. Where a vendor will not answer, the guidance expects the gap to be documented.
What Should a Bank Document When an AI Agent Assists Due Diligence?
The file should show each finding with its source and retrieval date, the information that could not be obtained, the analyst’s conclusion and rationale, and who approved the relationship. The 2023 guidance lists due diligence results among the documents a banking organization keeps, and an examiner reading the file needs to tell agent-gathered evidence from staff judgment.
Does a Bank Need to Perform Due Diligence on the AI Agent’s Provider?
Yes. The provider of an AI agent is a third party, and the 2023 guidance applies to it like any other relationship, scaled to the risk of the activity. Information security, operational resilience and reliance on subcontractors, including any model or data providers the agent depends on, are among the factors the guidance lists.
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