The Red Flag Group®
due diligence investigation

Due diligence investigation

 

The difference between a private investigator and a due diligence professional

A private investigator is someone who started for themself, who may or may not have previously worked for the police, who wanted to follow their dream. They may feel like a movie star at times, sometimes living beyond the law, taking on whatever assignment comes across his path.

I would put the private investigator on the left side of the spectrum, where everything is allowed as long as you get your evidence on the table. Next I would put the security firm, followed by the investigations firm. Not really on the scale but maybe hovering around it somewhere we find the data company which owns proprietary data but which does not have an investigative or compliance-related background. At the far right of the spectrum is the compliance firm, offering compliance solutions as well as due diligence services.

Running a due diligence department in a compliance firm means that I need to stay well within the boundaries of what is legally possible at all times. My team conducts due diligence following the strictest ethical standards and so does anyone we work with. Our sources are contracted, vetted, tested and trained in adhering to our standards. Like us, they can never cross the line. The most important reason for this is that, in the space where we operate, trust and reputation are everything.

In a way, we are just another third party like the distributors and suppliers we are screening on behalf of our clients. As a consequence, my team can never cut corners, we do not bribe, we do not endeavour to obtain information illegally, we do not advise our clients to buy more expensive reports than required, and we do not withhold information in an attempt to upsell reports and make more money out of our clients.

Instead, we take pride in advising on cost-effective solutions and being known as the firm that generates the best due diligence reports in the market, ensuring industry-leading turnaround times, created by the best researchers, utilising the most comprehensive sources available and providing clients with superior quality data which is collected, stored and delivered in a fully compliant manner.

Our product is different from the work being done by private investigators, security companies, investigative firms and data publishers. We do not use a magnifying glass or walk around with guns. We do not take on assignments which may force us to go outside of the law. We do not automate our research.

In fact, I see every due diligence report as a work of art. Our reports are an opportunity to show we can outsmart our competitors because we know where to get premium-quality data, when to dig deeper, when to stop, how to analyse findings and connect the dots, how to write reports, how to present our conclusions and how to rate the risks we identify through our due diligence.

We know what our clients want because we listen to them. Over the years, the look and feel of our reports has undergone numerous changes. Some improvements were instigated by listening to the market, others came naturally or from within our organisation, but many were actually triggered by feedback from our clients. It is all about being customer-focused and innovative. I do not want to sit and wait until the market is saturated, due diligence has become an automated commodity or the industry has turned into a low-end playing field. I want to be ahead of the competition at all times and provide a premium-quality product.

I am not a private investigator and I will never be one. I never wanted to be a movie star. However, I do not want to be a follower either. I am just a professional who wants to act with integrity, trying to deliver a quality product by being smarter than the rest. I am part of a firm which is considered the industry leader in compliance, being known for driving innovation in the industry and exceeding client expectations.

I am looking forward to 2020, when The Red Flag Group’s Due Diligence team will be aiming again to raise the bar and come up with a report style which should create a completely different customer experience.

Ten questions to ask your due diligence supplier

  1. Does your supplier truly understand risk and compliance?
  2. Is your supplier totally passionate about on-time delivery and quality?
  3. Do they have lawyers and counsel supporting them in their due diligence?
  4. Do they offer surveillance, or any form of tracking of people? If so, avoid.
  5. Will your supplier follow the law at every single opportunity?
  6. Does your supplier say they are licensed as a private investigator? If so, avoid.
  7. Are you sure that all information collected can be used in court?
  8. Are you aware of all of the supplier’s business? Are they involved in any questionable security activities? If so, avoid.
  9. Is the due diligence analysed by an expert or just compiled and summarised?
  10. Are you paying for due diligence or paying for data?

DUE DILIGENCE INVESTIGATIONS

What is the difference between a due diligence investigation and a background check?

When entering into an agreement with a third party, it is important to minimise any risks that the association poses. In order to do this, background checks and due diligence investigations are conducted.

A background check is the preliminary check and is largely based on information provided by the third party themselves, public information, industry reports and any specialised industry certification/registration.

Although considerable information can be acquired during this process, it may not provide a comprehensive picture. The data may also be slightly flawed, as it relies heavily on evidence provided by the third party themselves.

In contrast, a due diligence investigation is far more thorough. Its main aim is to verify that the information provided by the third party is accurate and to discover any information which may have been omitted.

The benefits of a due diligence investigation

When considering a new third party, a background check is a great place to start and may provide enough evidence to dismiss potential third parties. However, when the results have come back positive, it is wise to conduct a due diligence investigation before committing to a business relationship.

The due diligence investigation is invaluable in terms of filling in any gaps left by the background check, as well as corroborating the information provided by the third party.

Although this process takes time, it is well worth the time and effort to carefully scrutinise the third party. This will ensure that the risks of being unexpectedly dragged into a scandal in the future will be minimised. Being linked to a supplier who, for example, has a history of unethical work practices, or is found to be corrupt or money laundering, will do nothing to boost your business in the long term.

Within the diligence investigation, information is gathered in the following areas:

  • Illegal or criminal activities
  • Criminal proceedings and litigation histories
  • Regulatory issues
  • Key players and their histories/associations
  • Headquarters and subsidiary offices
  • Media publications
  • Corporate, partnership and business records
  • Regulatory history, sanctions and violations
  • Personal and business reputations
  • Property and other asset-related sources

Due diligence investigation services

It is worthwhile considering the use of specialists to conduct the due diligence investigation. It is a highly specialised field, requiring expertise in sophisticated fact-finding techniques and high-level analytical skills.

The due diligence investigators will tailor the investigation to suit each individual client and their specific needs. Because information obtained from databases and on-line resources may be out of date or incomplete, due diligence investigation services are often conducted onsite in developed and emerging markets. The investigation will include individual interviews, as well as a thorough analysis of public records.

Being fully aware of the past dealings and behaviour of a potential third party can provide peace of mind. Due diligence investigation services may not always provide the results that were hoped for, but they can minimise the chances of any nasty surprises in the future and allow you to enter any agreements with your eyes wide open.