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What Are Discreet Interviews?

Discreet interviews, also known as discreet source work or human intelligence (HUMINT) is information provided by human sources, not public records (courthouses, files, documents, etc.).

How Are They Different from Reference Checks?

Unlike reference checks that are provided to the client or background check firm by the subject being evaluated, discreet interviews are subjects close enough to the individual to speak to their reputation but are not provided by the subject to prevent bias or overly positive answers.

Additionally, discreet interviews can be used outside of normal role/appointment checks and be utilized for potential business investments, acquisitions, partnerships, etc. Discreet interviews are accomplished without notifying the individual or company that they are being evaluated.

Why Are They Valuable?

Discreet interviews provide unbiased human intelligence on an individual’s reputation without alerting the subject they are being investigated.
Many regions do not have comprehensive public records & when dealing in jurisdictions with high bribery or corruption, documents cannot be trusted to paint a complete picture.
Public records do not provide backstory, context, and color that can be added by discreet interviews.

Most Common Uses of Discreet Interviews:

Subjects where there is an underlying concern, or a red flag came up during public records research.
International investigations in data–scarce jurisdictions.

Discreet Interview Process:

Client requests discreet interviews – often with a specific concern they are trying to uncover or due to the location of the subject.
Identify a contractor – Vcheck selects a local and industry-relevant contact.
Select sources – contractor identifies potential sources, which are then vetted by Vcheck to ensure they are closely-linked and acceptable.
Contractor interviews sources – questions are guided based on areas of concern, industry, etc.
Review the interviews from contractor – if any testimonials are uncovered and are not validated by all/most sources, Vcheck will go back to ask for additional clarification on the statement from the previous source(s) to ensure consistent information.
Report delivery – Vcheck summarizes confirmed findings and delivers the report to the client

Summary:

Discreet interviews can be extremely valuable as they provide an unbiased option on the target, provide additional context to findings in public records, reveal important factors in data–scarce jurisdictions, and can be accomplished without alerting the subject you are investigating.

Contact our sales team to learn how discreet interviews can protect your investments and reputation.

Human intelligence, in the context of reputational due diligence and background checks, refers to the collection of information from human sources. This can include discreet interviews, conversations, and other forms of direct interaction with individuals who possess knowledge of interest.

Pairing open-source intelligence (OSINT) with human intelligence (HUMINT) creates a finished intelligence product. In many instances, traditional OSINT investigations can uncover red flags reported in media, litigation, and regulatory enforcement records; however, these findings alone may not be enough to provide a complete picture of an event and will not provide the necessary context to help you understand the political, cultural, and industry-specific risks at play.

By asking specific questions in discreet interviews that are informed by public records information and tailored to the industry and/or jurisdiction in question, it will not only identify relevant risks, but deliver the proper color and context to alleviate or validate concerns that on the surface appear to be showstoppers but may be more complicated or benign than initially thought.

In high-stakes investments or environments where public records are scarce, HUMINT becomes invaluable. It allows for the collection of nuanced, context-rich information that is often not captured in formal records. However, not all HUMINT is created equally. We will unpack the three game-changing factors that determine the quality and success of a HUMINT investigation.

3 Game-Changing Factors when Conducting Discreet Interviews

1. Interview Approach & Data Integrity

The person conducting the interview is possibly the most important part of the investigation. The best practice is to utilize interviewees more closely linked with the region or industry to conduct discreet interviews. Using an interviewee on the ground is paramount to ensure the comfort and therefore openness of the sources interviewed, it de-risks the subject finding out about the inquires, and ensures the right threads are pulled and corroborated.

To save costs, some firms use their own employees disconnected to the industry or region to attempt to obtain interviews. This heightens the risk of the target finding out about the investigations, poor source selection, and rumors or biases to be reported as fact.

This discrepancy in data quality becomes even more present in regions where openly seeking information can raise suspicions, lead to resistance, or even endanger the safety of the source.

Discreet inquiries rely on building trust, using indirect questioning techniques, and leveraging existing networks to access information without drawing undue attention.

Some examples of interviewees Vcheck has used in the past include journalists, veterans of industry, industry analysts, legal professionals, and in certain international jurisdictions, regulatory sources and government officials.

2. Quality of Sources

Selecting the correct sources is critical to the success and accuracy of the HUMINT project. The investigative team must strike a balance of finding sources who are well-placed and would therefore have insight into the information we seek but removed enough to limit the risk of the subject becoming aware of our investigation.

For example, a former senior marketing employee commenting on the intricacies of a subject company’s finances or perhaps of a regulatory or legal issue, would raise some red flags. A marketing employee may have an understanding of how the company is perceived in the industry and market but they are unlikely to have had access to key information on regulatory or financial matters involving the company. This commentary would cause us to question the credibility of this source’s testimony.

It is vital to obtain viewpoints from multiple sources with a wide array of backgrounds and take into consideration the level of access to information regarding the subject that different sources would have.

3. Number of Sources

It is unlikely that one single source would hold the key to our investigation or that one single source can provide all the information the client is seeking. In addition, precisely because human sources are not infallible, we use interviews from a variety of sources with as diverse backgrounds as possible to paint a comprehensive picture of a subject’s profile.

For example, if a former mid-level employee at a company makes a particularly unsavory claim against one of the company’s executives, based solely on this commentary, it’s difficult to determine if the employee may perhaps hold a grudge against the executive. However, if we then also obtain commentary from another former executive at the same company who testified to a pattern of persistently high turnover among the executive’s staff due to the executive’s actions contributing to a hostile work environment, then we would have more information to substantiate the mid-level employee’s claims. Or if a former colleague of the executive at a different company were to admit that the executive was difficult to work with at times and relayed similar concerns, then we would have more information to evidence the emergence of a pattern regarding this particular executive’s actions, personality, and reputation. It is therefore vital to obtain viewpoints from multiple sources with a wide array of backgrounds.

Some diligence providers greatly limit the number of interviews conducted to save costs which dramatically cheapens the report and confidence in information gathered.

The Power of Discreet Interviews – Examples:

Example 1:

A recent investigation into the shareholders of a newly established oil entity revealed important management issues. While public sources yielded minimal information about the company, human intelligence sources unveiled the true leaders of the company. Human intelligence uncovered the officially listed shareholders appeared to be mere figureheads, concealing the true owners: senior military officials. These influential figures had notable reputational concerns, including ties to arms smuggling and associations with a regime. Furthermore, discussions indicated that the company thrived due to corrupt practices, making corruption its primary operational driver.

Example 2:

In another recent human source investigation, Vcheck delved into the executives of a prominent organization. The findings revealed a troubling landscape of toxic workplace dynamics, inadequate management practices, and multiple HR-related concerns. One specific C-Suite member stood out in interviews. Although his public records appeared pristine, sources expressed serious apprehensions about his workplace bullying tendencies and the expression of racist and misogynistic views. These behaviors significantly contributed to a hostile work environment and would not have been uncovered through public records or normal M&A diligence as no suits or settlements had yet to occur.

Conclusion

In high-stakes investments and especially in countries where public records are limited, discreet interviews and human intelligence emerge as indispensable tools for accessing information. They enable decision-makers to obtain critical insight before proceeding with transactions and navigate the complexities of data-scarce environments and uncover insights that would otherwise remain hidden.

Vcheck has built a robust HUMINT network around the globe and across dozens of industries to ensure you can know more about who you are doing business with.

In the fast-paced world of investment banking, the allure of high returns can sometimes overshadow the importance of thorough due diligence, especially during the pre-IPO phase. One of the most critical documents in this process is the S-1 registration statement, a detailed disclosure required by the U.S. Securities and Exchange Commission (SEC) for companies planning to go public. This document provides a comprehensive overview of the company’s financial health, business model, and potential risks. Given its significance, ensuring the accuracy of the information presented in the S-1 statement is paramount to avoid legal repercussions and safeguard the interests of all parties involved.

Avoiding Shareholder Lawsuits

One of the primary reasons due diligence is crucial is to prevent shareholder lawsuits. If the S-1 statement contains inaccuracies or omits material information, it can lead to legal challenges from investors who may suffer financial losses post-IPO. These lawsuits can not only result in significant financial liabilities for the company and its underwriters but also damage reputations and investor confidence.

While many assume false claims and inaccuracies are rare, this has been seen in even some of the largest IPOs in history. A good example of a shareholder suit due to false claims was Yahoo! Inc.’s IPO.

Yahoo’s CEO at the time, Scott Thompson, was found to have inaccuracies in his resume regarding his educational background. His resume, which was referenced in Yahoo’s SEC filings, claimed that he held a degree in computer science, which he did not. This led to a shareholder lawsuit alleging that the company’s board failed to properly vet Thompson’s credentials before hiring him.

Other Risks of Inadequate Due Diligence

Beyond shareholder lawsuits, failing to conduct proper due diligence can expose investment banks and their clients to several other risks:

Regulatory Sanctions: Inaccurate or misleading information in the S-1 statement can attract regulatory scrutiny and penalties from the SEC, leading to delays in the IPO process or even the withdrawal of the registration.
Market Reputation: The credibility of the investment bank and the company going public can be severely tarnished, affecting future business opportunities and investor relations.
Financial Losses: Undetected issues in the company’s financials or operations can result in overvaluation, leading to significant losses for investors and underwriters once the stock is publicly traded.
Operational Risks: Unidentified legal, compliance, or operational issues can surface post-IPO, disrupting the company’s business and affecting its stock performance. A few good examples of these post-IPO issues include RadioShack’s CEO and separately, Veritas’ CFO resigning due to falsified educational claims, which impacted credibility and stock performance of the respective companies.

Conclusion

Comprehensive background checks on company directors are not just a procedural step in the investment banking process; they are a critical safeguard that ensures the integrity of the S-1 statement and the success of the IPO, and the reputation of the underwriters. By meticulously verifying the accuracy of the information presented, investment banks can protect themselves and their clients from legal, financial, and reputational risks.

Vcheck partners with leading investment banks to help mitigate risks by validating claims and exposing red flags in a business and leadership before IPO. As part of research, Vcheck’s investigations teams validate experience and education claims, uncover risk issues in a director’s track record and market reputation, and ensure that all necessary litigation, legal risks, and regulatory issues are identified prior to filing the S-1.

Ensuring Accuracy in Complex Analyses

In international due diligence and reputational checks, precision and depth of information are paramount. While digital tools like Google Translate offer convenience and speed in language translation, they often fall short in delivering the accuracy required for thorough due diligence processes.

The complexity of pre-transaction background checks, where every detail matters, requires translations that go beyond literal word-for-word accuracy. Investigators excel in conveying the full meaning, including nuances and implied tones, which are crucial for comprehensive background analyses. Here are a few examples of common mistakes made in investigations by teams who do not have native speakers.

Four Common Mistakes

1. Romanization by Country

The name Zhang Wei (张伟) is translated using Standard Chinese-English translation commonly used in Mainland China. In Hong Kong, it is most likely translated into Cheung Wai, which is based on the Cantonese Wade-Giles translation method. In Taiwan, the name is generally translated into Chang Wei, using a Mandarin style Wade-Giles translation. We must consider the regional differences based on the country in which the subject resides, and where the subject was born to ensure completeness of research.

2. Identifying all Possible Variations of Regulatory Risk

There are many forms of how words in Chinese are used as nouns, verbs, and adjectives. For example, corruption/bribery may be expressed in many ways and characters that may not be highlighted by a translation tool. We utilize our dirty word search strings in Chinese to cover a comprehensive number of variations such as “贪污”, “贿赂”, “受贿”, “行贿”, “贪腐”, “腐败”. Without conducting searches with all these variations and having the skill to read and identify them in research, efficiency and accuracy would be greatly limited.

3. Omitted Vowels

There are no standard or universally accepted transliterations for Arabic names. This results in a need for human translators who are familiar with the language to cross check the subject’s identity through other verification methods beyond ID/full name.

Arabic tends to not write out vowels, which must be added back to the of the name by a native speaker. As a result, the vowels that are chosen for the same name can be inconsistent from person to person. For example, the name O-m-r (عمر) could be Latinized Omar, Umar, or Omer. This decision is entirely subjective and there are even examples of different Latinization of surnames within the same family.

4. Transliteration vs Translation

Transliteration is the process of converting words like they are pronounced in the original source language into a familiar alphabet. Many people with Arabic names may choose to go by either the transliterated or translated version of their name, depending on preference. For example, the name Nuh (نوح) may not be transliterated well due to English lacking the letter to capture the sound ح. A subject may choose to use a country-specific equivalent of their name instead and go by “Noah” instead.

Enhancing the Integrity of Global Communications

As global interactions become increasingly complex, the need for meticulous due diligence and background checks grows. Investigators stand as a critical asset in this process, ensuring that every piece of information is accurately conveyed and understood, thereby protecting against reputational risks, and facilitating successful international transactions. Their expertise not only transcends linguistic barriers but also ensures that the subtleties of language do not become obstacles to thorough, effective due diligence and background investigations.

At Vcheck, we have linguistic experts with coverage that spans over 135 countries to ensure clients have the most precise and relevant information possible to make better business decisions.

As interest rates continue to rise and public markets remain volatile, private credit markets have filled a critical void as a source of capital for commercial real estate borrowers and middle market companies. However, direct lending transactions are complicated and deal timelines are only getting tighter, which means that the background check portion of a lender’s due diligence process must be quick while not sacrificing quality or comprehensiveness. Additionally, alternative lenders often lack the compliance resources available at leading investment banks and can be exposed to significant risk. Non-bank lenders must be surgical in screening borrowers and partner with a background check provider that will quickly identify red flags to help determine borrower risk. In this guide, Vcheck Global has outlined three primary risk areas to focus on for vetting borrowers, common red flags and the importance of contextualizing background check findings to paint a risk profile and spot adverse patterns. Lenders must understand a borrower’s ability to make payments on the loan as well as other financial liabilities. This starts with assessing the borrower’s creditworthiness as well as screening for bankruptcies and tax liens. Additionally, identifying UCC filings will help Asset-based Lenders in particular understand if a borrower’s assets have been pledged as collateral in another transaction.

Creditworthiness & Red-Flags

Lenders must understand a borrower’s ability to make payments on the loan as well as other financial liabilities. This starts with assessing the borrower’s creditworthiness as well as screening for bankruptcies and tax liens. Additionally, identifying UCC filings will help Asset-based Lenders in particular understand if a borrower’s assets have been pledged as collateral in another transaction.

Litigation History

A borrower’s ability to repay their loan can be directly impacted by litigation filed against the company and resulting claims and damages that the company may be liable for. If a borrower is preoccupied with their legal battles, making payments on their loan may become less of a priority or they may not have the financial resources to repay the loan. The same idea holds true for the borrower’s executive leadership. If they are involved in personal litigation, it can be a distraction to their executive responsibilities, including proper corporate governance.

Regulatory and Reputational Risk

The risks and repercussions of doing business with a sanctioned or state-owned party has never been higher and fraud in the lending industry has been ever present. Lenders must establish the identities and existence of borrowers through identity and corporate record verification methods as well as ultimate beneficial owner searches. Moreover, lenders must screen borrowers against sanctions lists and other watchlists to ensure they are upholding Know Your Customer best practices and avoid hefty fines and reputational damage.

Context is Key:

While identifying a significant red flag in the background check process can stop a deal in its tracks, it is important not to overlook patterns of adverse information and the timeline of their occurrence. A combination of negative findings such as outstanding debt, litigation, and adverse media can be indicative of risk, particularly when there is a pattern over the years, or the events have occurred recently. Moreover, the identification of risk indicators in the personal lives of a borrowing company’s leadership team, such as a recent DUI or an assault charge, may be connected to larger issues at the company, jeopardizing its ability to meet its financial obligations.

To learn more about how Vcheck’s due diligence services support alternative lenders, connect with our team of experts here at Vcheck Global. Our diversity of investigative offerings, paired with industry-leading turnaround times and in-depth reporting, means you receive the quality information you need, when you need it.

Today, Inc. revealed that Vcheck Global, a leader in international due diligence and background check services, is No. 1,537 on its annual Inc. 5000 list, the most prestigious ranking of the fastest-growing private companies in America. The list represents a one-of-a-kind look at the most successful companies within the economy’s most dynamic segment—its independent businesses. Facebook, Chobani, Under Armour, Microsoft, Patagonia, and many other well-known names gained their first national exposure as honorees on the Inc. 5000.

“We are honored to be named, for the fifth year in a row, as one of the fastest-growing private companies in the US. The team at Vcheck Global is a special one–we’ve been able to continue our amazing growth path through booming markets, pandemic-challenged markets, and environments that continue to present new and different challenges every day,” said Julie Peck, CEO of Vcheck Global. “Our growth and success are especially meaningful against the backdrop of the sheer magnitude and speed of change in the world. We will continue to do what has made us successful all along, which is to take care of our customers and each other, stay creative and flexible, and never give up.” Read the full press release here.

Third-party screening solutions are a must-have for compliance teams amidst supply chain disruptions and rapidly shifting regulatory landscapes.

How do you know which third-party automation offerings provide the most bang for your buck?

Here are five features to look for when selecting a platform.

1) Risk Indication

Third-party risk management is not a one size fits all process. Factors to consider include your company’s workflows, policies, and risk tolerance. The ability to benchmark third parties based on your company’s risk concerns eliminates a common pain point of due diligence clients – having to sort through a lengthy report in order to identify organization-specific red flags.

2) Ongoing monitoring

The information contained in a traditional due diligence report becomes dated the moment it lands in a client’s inbox. Annual refresh reporting, while beneficial, carries the risk of missing out on pertinent information for months at time. Ongoing monitoring alleviates this concern by bringing relevant information to attention without delay.

3) Escalation to Enhanced Due Diligence (EDD)

Online databases permit the rapid retrieval of public records from worldwide sources, however, this information may only provide basic details. Enhanced Due Diligence (EDD) driven by human analysts builds off these findings to paint a fuller risk picture.

4) Global Reach

International expansions, cross-border deals, and stretching supply chains increase a company’s global risk exposure. Confirm a third-party management platform’s ability to generate questionnaires in foreign languages or escalate automated findings into Enhanced Due Diligence (EDD) conducted by multilingual analysts.

5) Documentation

The ability to build a credible and defensible diligence framework, as outlined by the DOJ, merits equal consideration when selecting a screening solution. Being able to show every compliance step, decision, and action taken-from onboarding to reporting-streamlines, supports auditing, and allows compliance teams to efficiently respond to regulator requests.

To learn more about third-party risk management priorities, connect with Vcheck Global. Vcheck Global’s Rapid Enhanced Diligence (RED) screening solution provides comprehensive and automated risk screening and ongoing monitoring of your entire third-party portfolio.

Third-party screening solutions are a must-have for compliance teams amidst supply chain disruptions and rapidly shifting regulatory landscapes.

How do you know which third-party automation offerings provide the most bang for your buck?

Here are five features to look for when selecting a platform.

1) Risk Indication

2) Ongoing monitoring

3) Escalation to Enhanced Due Diligence (EDD)

4) Global Reach

5) Documentation

Picking a due diligence provider can be overwhelming. Streamline your search while laying the foundation for a long-term partnership with these five considerations:

Reputation

Due diligence is an essential component of both corporate compliance and decision-making. Having confidence in your due diligence provider is a must. Before ordering your first report, consider running the provider’s name through a search engine alongside adverse terms such as “litigation OR lawsuit OR case OR complaint OR violation” to get a sense of red flags pertaining to the provider. For added peace of mind, go beyond Google and ask to speak with existing clients. To increase the efficacy of these inquiries, ask for a reference from within your industry.

Protection

Due diligence necessitates sharing sensitive information. This makes it important to inquire about a prospective provider’s policies for protecting the personally identifiable information (PII) of report subjects. PII protection is especially pertinent when due diligence projects include credit checks and the verification of identification documents. Make sure to ask about subcontractors, specifically how they are screened, and how frequently, as well as what sort of privacy guidelines they are required to follow.

Experience

Due diligence findings can make or break deals. Are reports being churned out by a rotating crew of recent graduates or being crafted by experienced investigative professionals? Look for due diligence analysts with specialized academic backgrounds and professional certifications including Certified Fraud Examiner (CFE) and Certified Anti-Money Laundering Specialist (CAMS). If your due diligence needs include international capabilities, it is advantageous to have in-house regional specialists. The ability to infuse projects with foreign language skills and on-the-ground experience is a significant competitive advantage.

Support

What does client support look like? Having a dedicated point of contact sets the foundation for a successful client/provider relationship. The advantages of working with well-trained researchers are lost if the team is not accessible when client questions arise. Find out what standard turn-around-time looks like from your due diligence provider. Is expedited service available? While you may not initially require this capability, it provides reassurance down the road. Similarly, find out how quickly you can escalate red flags. This includes the ability to conduct various levels of screening running from automated third-party screening to analyst-driven due diligence reports featuring discreet source inquiries.

Transparency

A provider should be able to provide fees in advance of work being initiated. Report particulars to be confirmed with the client prior to starting an investigation include what jurisdictions are included, how long the lookback period is, and what searches are covered.

As a law firm, competitive intelligence pertaining to M&A, beneficial ownership, and litigation is essential. These three legal industry-specific screenings merit consideration from all firms, regardless of size and practice area.

Lateral Partner Screening

Lateral partners can bring incredible revenue growth potential, yet low retention rates are a constant thorn in the side of firm leadership teams. Moreover, partner recruiting represents a substantial firm expense when failed laterals necessitate a repeat of this pricy process. In searching for a due diligence provider to support lateral hiring success, look for a provider that can offer a narrative approach to reporting.

Prospective Client Screening

Both the American Bar Association (ABA) and International Bar Association (IBA) recommend conducting due diligence on prospective clients. This provides an opportunity to prevent a myriad of problems including Conflicts of Interest (COI), firm reputation issues, unpaid invoices, client misrepresentation, and ethical entanglement. While some legal firms conduct client screening in-house, partnering with a specialized provider of due diligence offers notable advantages including:

Preservation of independence and neutrality
Investigative expertise
Access to established source networks

Third-Party Screening

From billing software to office maintenance, law firms engage with a host of third parties each day. Missteps by these individuals and organizations, ranging from data breaches, inclusion on watch or sanctions lists, unethical supply chains and employee misconduct, can quickly harm a firm’s reputation. This reality makes comprehensive screening an essential component of third-party onboarding and relationship management. In order to maximize efficiency and minimize spend, look for a solution that can be customized according to your organization’s specific risk tolerance, policies, and workflows while automatically monitoring third parties throughout the entirety of the third-party relationship.

To learn more about due diligence for the legal industry, connect with Vcheck Global. Our clients include 40% of the Top 15 law firms (ranked by deals serviced.) A diversity of investigative offerings ranging from lateral partner-focused due diligence reports to automated third-party screening, paired with industry-leading turnaround times means you receive the quality information you need, when you need it.

Cross-border deals, global footprints, and shifting supply chains make international capabilities a top of mind consideration when selecting a due diligence provider. This presents a different challenge from its domestic counterpart. Effective international due diligence requires a specialized tool kit. When evaluating a due diligence provider’s ability to achieve your international investigative goals, look for following five capabilities:

Global Network

While domestic due diligence is rooted in open-source information and public records, international due diligence often requires investigative teams to delve deeper than their desktops. Common international informational challenges include public records access, limited or state-controlled media, and plain old “tough questions.” Discreetly obtaining actionable insights requires a deep and experienced network of trusted local investigators.

Subject Matter Expertise (SME)

Though machine learning and AI have contributed significantly to the due diligence industry, crucial context continues to get “lost in translation.” The human touch is still needed. Analysts who are well-versed in region specific socio-political issues and regulatory landscapes are crucial. Language-enabled analysts ensure translated information is both accurate and context-aware. In addition to directing international investigations, subject matter experts should be available to walk clients through research findings.

Risk-Based Approach

International due diligence is not a one size fits all process; it must take into account variables including location, industry, and risk tolerance. Government agencies including the Treasury Department’s Office of Foreign Assets Control (OFAC) and Department of Justice (DOJ) recommend taking a risk-based approach to due diligence. Ensuring that you have due diligence partners who can help you build and maintain a credible and defensible program is paramount.

Scalability

While certain jurisdictions and subjects warrant deep dive due diligence from the start, a more streamlined approach may suffice for other projects. To accommodate the diverse use cases due diligence clients commonly encounter when conducting business internationally, ask your due diligence provider if they are able to scale projects from instant watchlist screening all the way to an analyst-driven report incorporating interviews with local sources.

Client-First Focus

Unfamiliar languages, regulations, and cultures contribute to the complexity of conducting business abroad. While international investigative proficiency is imperative, so is finding a trusted advisor to serve as a guide from initial project inquiries through post-delivery discussions. A proactive international due diligence provider keeps clients informed of red flag findings and allows deal-specific issues to be dealt with as they emerge.

When adverse information concerning an executive comes to light, the reverberations are both damaging and widespread; the trust of customers, business partners, and shareholders is compromised while companies are exposed to legal, regulatory, and financial penalties. Vetting executive-level candidates with investigative due diligence is a proven method for mitigating these risks.

Keep these three considerations in mind when evaluating the efficacy of an executive screening due diligence report:

Adverse Media Review

Relying solely on checks of criminal and court records runs the risk of missing out on pertinent insights into a candidate’s behavioral tendencies and public reputation. Targeted media screening offers a look at the individuals and organizations within a candidate’s professional and social circles. Given social media’s ability to instantly tarnish an individual or organization’s reputation, it’s worth confirming that any screening covers a variety of social media platforms. In order to maximize informational access, a language-enabled researcher may need to be engaged, based upon a candidate’s location history.

Resume Verification

Headlines announcing resignations and terminations of executives caught lying on their resume have become commonplace. However, the information garnered through an effective executive screening process goes beyond confirming prior employment, academic degrees, and professional credentials. Attention needs to be paid to instances of resume embellishment, particularly when a pattern of intentional exaggeration is identified. Moreover, the resume verification process can uncover valuable information pertaining to a candidate’s location history, which may have been intentionally, or accidentally, omitted from any provided or publicly available resumes or bios. Similarly, this process often reveals prior or alternative names of both the individual and associated organization(s).

Discreet Source Inquiries

Diversity, Equity, and Inclusion (DEI) is an integral component of organizational reputational risk management. Reliance on public records alone to identify executive candidates with a history of misconduct or insensitivity carries the risk of pertinent information going uncovered. Discreet source inquiries are a proven method for filling knowledge gaps while obtaining industry-specific insights. These targeted conversations can reveal workplace complaints that were not yet escalated internally or externally. An added benefit is their ability to paint a picture of a candidate’s management style.

To learn more about integrating investigative due diligence into your executive search process, reach out to Vcheck Global. Our Executive Screening Report provides the risk management insights needed to make confident hiring decisions.

Vcheck Global, a leader in international due diligence and background check services, is thrilled to announce that their CEO, Julie Peck, has been listed as one of the Top 100 CEOs for Women.

“The chief executives on this year’s list have fostered company cultures that embrace diversity and inclusion, as shown by the feedback from their female employees,” said Comparably CEO Jason Nazar. “The consensus is that these top-rated CEOs lead with empathy and emotional intelligence.”

This announcement comes just after Vcheck was named to the Inc. 5000 list of fastest growing companies in America for its fifth year in a row.

“I’m thrilled and honored to make this list of best CEOs for women. The honor is even more meaningful to me as this ranking comes from my internal team. I have always strived to support and build organizations that walk the walk on values like inclusivity, equality and diversity. As a woman with a long career in technology companies, I’ve learned through my experiences that women are more likely to thrive in any organization when they have strong role models, champions, sponsors, and acknowledgement from executive leadership that women face unique and different workplace challenges. Leading by listening with compassion, empathy, flexibility and respect is the first step in creating a thriving workplace for women to build their careers. The Vcheck Global leadership team is diverse in itself, with women in several executive roles like our Chief Operating Officer, Chief Information Officer, General Counsel, and our Head of Marketing. These women, alongside our male leaders, all embrace the opportunities to model and explore female leadership together every day,” said Vcheck Global CEO Julie Peck. Read the full press release here.

LATAM Sustainable Investing: A Q&A with Randy Bullard of Morrison Foerster

Interest in sustainable investing is rising. Climates suited to renewable energy projects, governments welcoming foreign direct investment and diverse deal opportunities have sustainability minded investors evaluating opportunities in Latin America. To provide insight into the region’s markets and due diligence considerations, Vcheck connected with Randy Bullard, a partner in Morrison Foerster’s Corporate Department and co-chair of the firm’s Latin America Desk.

What is the focus of your practice?

Our practice primarily focuses on foreign direct investment, mergers and acquisitions, private equity and venture capital into Latin America. We typically represent both strategic and financial investors from the United States, Europe and Asia in their investments into Latin America.

At what stage in the deal process do clients typically reach out to you?

Very early on. For example, today we’ve been engaged by an investor at the very beginning of a process when diligence hasn’t even commenced to do an analysis of hot button issues. Common client questions include – What should we be looking at? How should we structure the diligence process? What outside advisors, including local counsels, should be engaged in-country to evaluate the target or the investment itself.

Green energy has been attracting tremendous investor attention globally. Is the majority of deal activity you’re seeing in Latin America structured around the traditional trifecta of solar, wind and geothermal, or are eFuels like green hydrogen driving deals?

It’s still, from our perspective, part of the traditional trifecta. We’re seeing a lot in the wind space in particular, but are seeing some solar deals as well. I think the others still are in their nascent stages. They’re still highly capital intensive. There are a lot of solar and wind projects that have been under construction for several years and are at the point in time in their development where an exit transaction makes sense for the founders or the sponsors. So I think the development trajectory of traditional assets dictates that they’re still more popular at this point.

What markets are being overlooked?

I think Chile in particular, though I wouldn’t say it was overlooked. I mean, there was a lot of regulation and legal activity in Chile that’s making it an attractive market. I would think it would be more of the smaller countries. The big dogs in the ring, so to speak, are the ones that get the most attention because the assets are larger, the opportunities are greater, as well as the number of consumers that can be accessed. The smaller markets, Costa Rica, Panama and Peru to name a few, I think are somewhat overlooked, but that’s more of a size of the market issue. It’s certainly something that is still important in those regions, but for outside investors, they typically do target the larger markets, just for scalability and access to consumers.

What countries offer the smoothest landing for investors breaking into Latin America?

Each country has its own specific challenges and risks. A few years ago, I would say Mexico is the easiest point of entry, but certainly we’ve seen over time political change and certain populous initiatives and political moves that have made Mexico a more difficult investment target. Obviously it’s an incredibly attractive market with 120 million people, NAFTA access and a tax regime that’s very familiar to navigate for US investors. Each country is somewhat different and the challenge of investing in Latin America is the pace of political, economic and social change which is very rapid. Countries fall in and out of favor depending on current economic and macroeconomic indicators, as well as political change and political movements within the various countries. So it depends on the particular time. Obviously Venezuela and Argentina are the most challenging markets, just because of the inability to access capital that’s been invested in the country and to repatriate it abroad and certain dysfunctionality in local operating regimes. But I wouldn’t say that there are necessarily markets that are easier than others. There are particular challenges and different regulatory regimes to each country.

How does the due diligence intelligence that you receive, or even that the client shares with you, support your work?

It’s critical to the process. I mean, it’s what we do first. I was thinking about this earlier today and thinking about it in the context of ESG due diligence. For example, five years ago, ten years ago, there would have been pushback from a target or a seller in particular to doing anti-corruption diligence or to provide reps and warranties with respect to anti-corruption issues, the theory being that these countries and these local owners were not subject to US law. They had no ability to determine whether they were compliant or not. That argument and that hurdle has gone away. Now everyone accepts that. For example, anti-corruption, anti money laundering, sanctions and OFAC analysis is something that’s done as a threshold matter at the beginning of a process. And that absolute reps must be given on these issues and that every investor, whether they’re from the UK or the US, or even in-country, expects these issues to be covered. Also the level of detail of the diligence [needed] has gone up. Usually outside advisors and accounting firms have their own arms now that do systems testing, internal controls, testing and risk assessment analysis on these issues. This is never an issue anymore. It’s the first thing to do. It’s part of the kickoff call and everyone knows it’s coming.

What are one or two major compliance and reputational risks for ESG investment in Latin America that you always put in front of your clients?

Well, it’s always anti-corruption and money laundering. It also depends upon the industry that you’re in. We’ve done a lot of work on behalf of financial institutions that are investing in the region and obviously this is top of mind for them. For the PE investor and the VC investor, it’s also a priority since they’re taking money from public institutions and they themselves may be a public institution so anti-corruption and anti-bribery is at the top of the list along with ESG. Let’s not forget the social and government element of it too. Obviously child labor, labor conditions and supply chain issues are huge reputational issues for any large company or any PE company. So I think that those have come much more to the forefront. Do I enter the place and leave it in a better place when I leave? This is an important issue and a huge reputational issue, particularly for US investors.

Looking domestically at the countries and the region, do you think the COVID-19 pandemic played a role in raising awareness of ESG issues among both the general populations and the governments?

That’s a very good question. Looking at how the economies are structured in most countries in Latin America, something like 45% of the population has what we call close contact jobs, meaning that they have to do it in person, they couldn’t pivot to a virtual world and couldn’t pivot to working at home. We saw it in Mexico at the very beginning of the pandemic where low income workers and even middle class workers had no choice but to go to work every day in a city of 20 million people during the middle of the pandemic. So things that affect workplace conditions and workplace operations also affect public health and national security. So by that token, and by that analysis, I think that definitely it’s come to the forefront a lot more, knowing that this is really an issue of public health and one of great interest in the country itself.

March saw Chile become the first nation to issue a sustainability link bond with its interest pegged to the country’s climate goal performance. Are you anticipating other countries in the region following suit?

I hope so. I mean, Chile has always been a bit novel in its regulatory reform and certain legislative initiatives that it has, so I expect that they will lead this process. I hope others do. It’s a very interesting product and anything that will help grow the capital market locally is obviously desirable for lawyers. Hopefully we’ll see more. The most important thing is to get the legislation right, and to get the regulations right around how these are issued, what they’re supposed to do and how they’re supposed to be measured. Hopefully there’ll be some thoughtful processes around how to implement them locally.

The private sector is becoming more involved in the issuance of green bonds in Latin America. When these are being issued, investors need to evaluate the ESG credibility of the issuers. What reputational risks should investors be prioritizing when they’re doing this issuer screening?

I think looking at it from a perspective of is this real, or is this a marketing ploy? Is this the type of company that can and should be issuing these bonds? I mean, we’ve all heard stories of companies that by definition what they do is bad for the environment, yet they’re issuing green bonds. So I think there’s a lot of skepticism about this product in particular and I think over the next couple of years, we’ll see a lot more scrutiny on them as to how to measure performance, how to evaluate whether this is greenwashing, whether this is creating a product to improve reputational position in the marketplace versus something that’s truly about environmental, social and governmental change. I think there’s a lot of skepticism around them. I mean, we’re seeing it even in the US with new SEC disclosures. It’s important to get the measurement right, and to develop metrics and abilities, to evaluate that these companies are actually doing what they promised to do.

What obstacles are you and your clients typically facing when it comes to staying on top of Latin America’s rapidly changing landscape?

One, you’ve got to read about political events and legislative change and legal change in 20 markets. So it’s a constant process of updating and staying on top of things and also the pace of changes is quick. If the IRS makes a change in the tax laws, there’s a period of comment. There’s a clear time for implementation and revision and careful consideration of the legislation. You know, you see it coming down the road, it’s gonna come down the road for a year and everybody’s prepared for it and there are clear rules on how to comply. In many jurisdictions in Latin America the changes occur overnight, the legislation has passed from one day to the next. There’s no implementing regulations behind it. It’s effective immediately and nobody knows how to comply or what to do to comply with the new laws so it’s exciting but frustrating at the same time. It’s just a constant process of staying on top of the market and talking to people. Before the pandemic, we spent a lot of time in-country in the larger markets. A lot of that was obviously client interface and seeing clients and visiting clients, but a lot of it is information gathering to make sure that we know what the hotspots are and what’s coming down the pike as far as political or regulatory change. We have a lot of friends in a lot of places to make sure that we stay on top of it.

Columbia, Chile, and Brazil have elections planned for next year. Are you watching these closely?

Yes, very much so. We belong to several sorts of think tanks and quasi-governmental organizations that bring speakers in from time to time so we’re on top of these, and you know, it depends on the direction of the wind and who you’re talking to. You have to understand where this person fits in the macroeconomic world as to what their opinion will be on matters. So yes, we’re watching elections very closely just because they’re highly charged in all three instances. We’re also talking to people on the ground, typically lawyers. I like to think of us in some ways as canaries in the mineshaft. We hear from people first. Whenever there’s concern over regime change, the clients call about a year in advance because they want to try to figure out alternative structures, diversifying their asset base, entering a new market, so we typically hear from people a long time before the elections start. It’s interesting to see that develop. My career has been long enough that I’ve seen three or four major transformative elections in Latin America. It’s interesting from a client perspective, probably not from their individual perspective to have to worry about diversifying their asset base or potentially leaving their homes, but it’s interesting for us to see how things eventually settle down, except in the case of Venezuela, unfortunately, that things always do get better. Like I said, the pace of change is such that as quickly as it can deteriorate, it can bounce back. This can happen in under a year, as we’ve seen in other markets like Brazil.

Aside from the topic of elections, are there any other upcoming regional events you’re watching or you’d advise others to be keeping an eye on?

I don’t think you could get bigger than the election in Brazil or the one in Columbia, given the candidates and some of their public rhetoric. It’s pretty interesting stuff. Also, the constitutional convention in Chile is just fascinating from any number of perspectives. There’s a lot of literature out there that this is a new left, that this is not a left. I, this is not me talking. I’m not sure if I agree with this, but at least this is what I’m reading, that this is a left that’s not a communist left in the tradition of Cuba or even Venezuela, but this is a new left that talks about indigenous rights, women’s rights issues of equality and inclusion that haven’t been seen before in other leftist movements, so I think it’ll be interesting to see how that works out and what happens. It will be interesting to follow in the sense that people are calling this new and it does have characteristics that we haven’t seen before. It’s not a 1930s leftist model or even a 1970s model. It’s certainly a 21st century model.

Is the resumption of travel accelerating the pace of deals?

We started traveling internationally about two months ago which is exciting because our practice, as I mentioned, is very face to face. We need to see people face to face. You need to hear what they’re thinking. You need to see what’s happening in the street. You need to watch the local news. So for us, it’s very exciting to be back traveling. I don’t know if it’s increased the deal making. We certainly were incredibly busy in 2020 and 2021, but I think that it’s sort of getting back to normal and certainly we’re seeing professional advisors back in their offices and in-country as well as people coming back to meet again, which is exciting and hopefully not going to take a step back. People are a lot more comfortable traveling. There is a relaxation of rules on entry and exit, not necessarily exit so much coming back to the US, but certainly for entry into Brazil. For example, they’ve dropped the testing requirement and other mask mandates and things like that. So it’s become a return to normal, but obviously still, I keep my mask in my pocket at all times just in case, but I’ve definitely noticed a difference recently and I’m excited for that.

What does regional interest in ESG issues look like going forward?

The region is right for it. I mean as far as environmental issues, the impact of climate change in central America, that’s happening immediately and has been happening for a couple of years, also with social issues. As I mentioned, given the nature of the economies locally and governments, issues around independent directors in particular were not a thing in Latin America two or three years ago nor were compliance officers, even ESG officers in the local companies. It’s exciting to see this new development, but it’s a region that’s right for it and one that can benefit the most, again, with respect to working conditions, access to vocational training, diversity and inclusion. Certainly in countries like Brazil, it is coming much more to the forefront and for many good reasons. I think that you’ll see that spread to other markets as well, but it’s just a region that’s multiethnic, and that has a demographic where the average age in many countries is in the early twenties. It’s a young population. It’s a technologically savvy population. It’s also a population that cares about renewable energy and cares about access to energy and access to connectivity. So all of these issues with the young populations, with the growing populations, with the growing economies, it’s just a very exciting place to be for these issues and probably the markets that can benefit from it the most.

Increasing prioritization of social consciousness by consumers and regulators is spurring interest in sustainable investment worldwide and Latin America is no exception. The region’s suitability and pursuit of green energy combined with a growing young, multi-ethnic and technologically savvy population is capturing the attention of sustainability-minded investors in the region and beyond. Success in the sector necessitates pairing an understanding of both region-specific risk issues along with knowledge of upcoming policy changes, including the potential economic and social reverberations.

Heading into Q3, firms considering sustainable investments in Latin America have a variety of renewable energy opportunities to consider, ranging from established solar and wind farms to pioneering geothermal and green hydrogen projects. In addition to the region’s abundant natural resources and climate conditions which are ideal for renewable energy cultivation, many governments are actively courting foreign direct investment in their country’s green energy offerings. As global awareness of these opportunities grows, so do the accompanying risks. Key considerations include:

Areas of Interest	Risk Considerations
Deal Activity A number of wind and solar projects in LATAM are nearing completion and scouting exit transactions. Heavy wind streams along Argentina’s Atlantic coast have tremendous offshore wind technical potential. The government is open to foreign investment in this underdeveloped sector. Nearly 100% of Costa Rica’s electricity is sourced from renewables. Its decarbonization plan launched in 2019 has been credited with increased foreign green energy investment.	Given the solar industry’s dependence on Chinese produced solar panels, pre-investment due diligence for solar projects should actively screen suppliers for potential violations of the Uyghur Forced Labor Prevention Act (US) which went into effect on June 21st. Keep an eye on geothermal energy and green hydrogen which are just taking off. Corruption has been a longtime impediment to regional economic growth. Sustainable investment projects present lucrative opportunities for bad actors to capitalize on. Special attention should be paid to parties involved in securing environmental and land permits including political exposure and prior allegations involving illicit payments.
Elections to Watch Chile is at the forefront of the region’s green energy innovation. In 2020, it initiated a plan to develop a domestic green hydrogen industry with the goal of becoming one of the world’s top three hydrogen exporters within 20 years. In March, Chile issued the world’s first sovereign sustainability linked bond. Chile’s natural resources, climate and workforce coupled with low levels of corruption position it to become a global green energy leader. However, a recently completed draft constitution has the potential to derail the country’s strong economy by increasing government powers and limiting individual freedoms if approved in a September referendum. In Brazil, concerns by major global investors surrounding environmental issues, including deforestation in the Amazon, which has increased under President Jair Bolsonaro, are pushing companies to prioritize adherence to global ESG standards. Should Bolsonaro win re-election in October, ESG focused investors are expected to look to shift their funds outside of Brazil.	The inclusion of former Chilean President Sebastian Pinera in the Pandora Papers sparked impeachment efforts which failed. The leak revealed Pinera family ownership of a mining project alleged by activists to operate in an environmentally sensitive area. This affair underscores the importance of including adverse media screening and ultimate beneficial ownership tracing when conducting due diligence in LATAM. The growth of green energy projects in remote areas such as the development of solar projects in the Brazilian Amazon necessitates consideration given to the environmental and economic impacts on local communities dependent on natural resources and wildlife to sustain traditional ways of life.
Greenwashing As the region increasingly courts ESG focused investors, verification of companies’ abilities to meet their sustainability promises becomes an integral part of the due diligence process. Recognizing increasing greenwashing concerns of investors, Colombia recently partnered with the International Finance Corporation to release a green taxonomy. Should this result in an uptick of foreign investment, expect other regional countries to follow suit.	A challenge in identifying greenwashing stems from a lack of international ESG reporting standards and definitions. The environmental claims of a potential investment target should be viewed critically with elements of the due diligence process including questionnaires, source inquiries and site visits focused on identifying misleading information.

The aforementioned areas of interest and accompanying risks offer a starting point for sustainability minded investors seeking an understanding of region and sector specific risk management pain points. This knowledge carries two important benefits; stakeholder confidence is bolstered and a risk-based compliance approach, as recommended by government agencies including the Treasury Department’s Office of Foreign Assets Control (OFAC), can be utilized. Diverse opportunities for sustainable investment in Latin America abound. When evaluating them, factor in the rapid pace of change in both the region and green energy technologies, viewing risk management in this context as a continual process rather than a mere pre-deal formality.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Global.

Interest in franchise opportunities is on the rise in the United States. This is attributed to a shift in American priorities, which triggered the much talked about “Great Resignation.” The opportunity to take charge of one’s career while creating a business legacy to pass on to younger family members has become increasingly attractive to Americans. For franchisors and private equity investors seeking to ride the current wave of franchise interest, partnering with a due diligence and background screening provider affords confidence in two important areas vital for franchise success, long term viability, and risk mitigation. Failure to properly vet franchisee applicants carries significant risks which can harm a company’s reputation, legal, and financial standing.

Franchisors and franchise-focused private equity (PE) firms should closely examine three risk factors in any due diligence exercise to identify long term viability obstacles posed by franchisee applicants. These factors are examining a candidate’s financial health, reputation, and qualifications in order to provide valuable insight into their ability to align with franchise specific regulations and strategic planning. Just as potential franchisees are entitled to a copy of a Franchise Disclosure Document (FDD) to provide peace of mind prior to their purchase, investigative due diligence can expose significant risks or allay concerns that franchisors and their PE investors may have about franchisee applicants.

Financial Health

Options for examining a franchisee applicant’s financial viability include targeted research concerning past bankruptcies, both personal and corporate, as well as judgements and liens. These searches provide insight into the applicant’s ability to fulfill their contractual obligations. Added assurance can be obtained by incorporating credit checks. Aside from providing a picture of the applicant’s financial standing, credit checks have the advantage of illuminating an individual’s spending habits.

Reputation

A leading selling point for franchise businesses is maintaining a reputable name that is attractive to both consumers and investors. An applicant’s reputational picture can be painted through the use of open-source intelligence (OSINT) including analysis of public records and media. Reputational intelligence is beneficial since some franchises insist that any franchisee share their core values. Before entering into a franchisee arrangement, it should be clear that the applicant’s values align with that of the franchise.

In regards to franchise due diligence, social media screening has proven to be advantageous in today’s business environment. By examining a candidate’s social media activity, you can reveal whether an applicant has a tendency to impulsively and publicly respond to hot button socio-political issues with the potential to alienate valued customers. Consider a 2021 incident where a PJ’s Coffee franchisee in New Orleans forfeited a location after posting a vulgar response to a tweet by NBA star LeBron James.

Due to the low occurrence of Foreign Corrupt Practices Act (FCPA) cases as it relates to franchisee applicants, FCPA due diligence in this sector is often overlooked. However, many of the same FCPA risk factors keeping chief compliance officers of multinational conglomerates awake at night also exist for franchises, which are still responsible for complying with industry regulations when conducting business in high risk jurisdictions abroad. To address risk mitigation, bolstering standard risk checks with research targeting franchise specific FCPA risk issues is advisable. Specific attention should be paid to any instances or allegations of bribery such as attempts to bypass health and safety examinations or bribes to skirt labor laws by hiring underage, unlicensed, or undocumented labor.

Qualifications

Verification of a franchisee applicant’s employment, education, and professional certifications offers dual benefits to franchisors and private equity investors. First, verifications aid in gauging an applicant’s honesty; significant discrepancies between self-reported and verified information can guide a follow-up conversation by the franchisor and investors. Secondly, the verification process provides an avenue for uncovering pertinent information including collegiate disciplinary infractions and violations of professional standards. Such findings are especially beneficial for franchising purposes. With franchisee applicants often exploring new industries, deeply ingrained personal and professional habits are likely to follow. Accordingly, information gleaned from the verification process provides valuable insight into an applicant’s ability to acclimate to the challenges of their new industry.

Proceeding with Confidence

Ultimately, completion of thorough franchisee applicant due diligence benefits all parties. By minimizing the chance of informational surprises pertaining to an applicant’s financial health, public image, and qualifications, franchisors and their private equity funders are able to confidently move the deal forward. Conversely, the due diligence process demonstrates to franchisee applicants that they are collaborating with professionals focused on long-term growth, as opposed to turning a quick profit.

For franchises seeking to vet franchisee applicants or private equity firms investing in franchises, partnering with a seasoned diligence provider lays the foundation for financial success. Given the cross-border popularity of franchises – international franchises expanding into the US and American franchises opening abroad – selecting a due diligence provider with global reach and proven international investigative experience is essential. Connect with Vcheck Global to explore due diligence options for your franchisee reputational risk mitigation program.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Global.

The global economic havoc triggered by the COVID-19 pandemic created unique growth opportunities for certain regions and industries. Ongoing government lockdowns, lengthy quarantine periods and extensive travel restrictions drove consumers globally to embrace the convenience of online offerings, notably internet commerce and delivery services. As employers worldwide convert temporary remote positions to permanent while individual preference for all things clickable and quick has become ingrained, the explosive growth of digital offerings shows no signs of waning.

One such pandemic success story is that of Southeast Asia’s internet economy. Expected to reach a staggering $1 trillion by the end of the decade, its growth is the product of both fate and planning. Countries in the midst of this economic transformation include Indonesia, Thailand, Vietnam, Singapore, Malaysia, and the Philippines. Their STEM savvy, young and urbanized workforces are producing technological offerings which are consumed by a growing middle class. Southeast Asia’s internet economy offers investment allure for American private equity firms, hedge funds and venture capital and it can be expected that more of the region’s tech giants will seek out US listings either through traditional IPOs or merging with US SPACs.

While Q2 M&A activity in Southeast Asia is projected to drop slightly from Q1, deal volume is expected to be on par with last year’s robustness, in part due to ongoing consumer interest in all things digital. A key differentiator between this year and last is the resumption in business travel by Zoom fatigued investors which should result in an uptick in dealmaking. A positive M&A indicator is preparation by the Southeast Asian banking sector for increased regional deal flow stemming from continued tech sector growth. A sub sector to watch in the coming weeks is climate tech as the region seeks to boost crop yields while investors remain interested in ESG offerings.

A common misconception of first time American investors in the region is the ability to translate existing international investment success into Southeast Asia with little to no due diligence; however, this is far from the case. The region poses unique risks that should be holistically approached. Below are three areas tied to Southeast Asia’s internet economy that should be evaluated as part of any potential transaction.

Data Localization Deliberations

A topic dominating regional technology sector concerns is data localization. Namely, China is at the forefront of regarding data as an object of national sovereignty with other regional governments following suit. As part of their pre-investment due diligence process, American firms keen to enter Southeast Asia’s technology sector should investigate existing government access to locally stored data as well as obtain insight from regional experts that sheds light on the possibility of additional demands on personal or corporate data in the future

Acquiring Impactful Intelligence

Southeast Asian tech companies looking to go public via a traditional IPO or merge with a US SPAC warrant the same level of due diligence as a Western company. This includes evaluating the management team’s credentials, past performance, and uncovering any risk issues such as regulatory violations, litigation, or those tied to ESG. However, Southeast Asian countries still lack readily available public records making it harder to quickly evaluate a company and its management. In these scenarios, it is advisable to deploy in-country source inquiries to speak with industry experts and players who can comment on the company as well as offer insight into emerging trends and risk issues.

Assessing ESG and ABC Obstacles

The internet economy cannot function without warehousing and logistics which rely on local labor and partners supplied through third parties, whether they be agents, distributors or suppliers. American investors evaluating Southeast Asian tech companies should assess those companies’ exposure to a variety of related supply chain risks, including potential human rights and labor standards violations, environmental issues, and bribery and corruption exposure linked to the licensing and permitting process.

Picking a Proven Partner

As industries worldwide continue to suffer from COVID-19 induced supply chain disruption and labor shortages, Southeast Asia’s internet economy has proven remarkably resilient and is well positioned to continue its dynamic growth. Another factor fueling this growth is geopolitical tension between Washington and Beijing that is driving American technology investment interest further south towards well-positioned Southeast Asian digital developers. By addressing region-specific investment challenges in the due diligence process, including governmental data localization demands, limited public records availability as well as ESG and ABC concerns, American investors can both identify lucrative opportunities and avoid the associated risks.

Reach out to the Vcheck Intelligence team to speak with an expert and learn more about our Southeast Asia diligence capabilities and how we can assist in your pre-investment process.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

The United Kingdom has long been criticized for its attractiveness to unverified, and undoubtedly at times, highly problematic wealth from abroad. Withering criticism stems from the UK’s failure to control inflows of cash from oligarchs from Russia and other former Soviet States, who have acquired everything from luxury property to football clubs. Despite years of extensive reporting across national and international media, books and documentaries demonstrating the UK’s role in laundering oligarchs’ cash and offering them a comfortable home base, little was done on the part of successive UK Governments to combat these issues. Information regarding the personal connections between senior government officials in the UK and a variety of oligarchs has graced the pages of UK newspapers for over two decades, and as a result political appetite to take on these issues has been minimal.

Criticism of the UK’s lackadaisical attempts to confront the issue has focused in part on the ease with which it has been possible to own property that cannot be traced back to an ultimate beneficial owner (“UBO”). It is widely understood that large swathes of some of the most valuable real estate in the world are opaquely owned by individuals via corporate entities registered abroad. The absence of any way to verify who rather than “what” owns a particular parcel of land or property has allowed for huge amounts of both to be acquired by Russian oligarchs and others, allowing ill gotten gains to be converted into valuable property holdings in one of the world’s most stable countries.

Renewed and increased public criticism in the wake of the Russian invasion of Ukraine in February 2022 appears to have lit something of a fire under the UK Government to address some of these longstanding issues in a meaningful way, though the impact of the proposed changes remains to be seen in practice.

On March 15, 2022, the UK Parliament passed the Economic Crime (Transparency and Enforcement) Act. The bill, which received royal assent a week after Ukrainian President Volodymyr Zelensky addressed a joint session of the UK Parliament, introduced requirements that property purchased in the UK since 1999, and any property purchased in the future, by ‘overseas entities’ provides private information on its ultimate beneficial owner(s) including names, addresses and dates of birth. The information (with some personal information removed for privacy) will be publicly searchable when implemented, and failure to comply will result in fines and up to a five-year prison sentence. Similarly, transactions of property already held by overseas entities will not be permitted until the relevant information is provided to the register.

In theory, the implementation of the register represents a substantial step forward in transparency for UK property ownership. A publicly searchable register allows for verification of the ownership of properties held via foreign firms for the first time, and there is little doubt that there is much to uncover. The UBO register should thus significantly reduce the UK as a target destination for illicit funds, and will lose much of its long held luster as somewhere that ill-gotten gains can easily and securely be stashed.

However, the act itself is not without flaws or potential loopholes. For example, beneficial ownership reporting only applies when someone owns or controls more than 25 percent of an entity, potentially allowing for the use of family members or close associates as ‘straw’ shareholders to disguise the involvement of certain individuals. Similarly, there will be a six-month grace period (start date of the grace period yet to be specified) before any of these requirements take effect, potentially giving bad actors significant room to maneuver in advance of implementation.

Despite these pitfalls, and others no doubt that will become apparent as the regulatory particulars are finalized, the Economic Crime Act of 2022 appears to be a firm, if potentially flawed, step in the right direction for the UK Government as it seeks to tackle inflows of illicit finance. For anti-corruption campaigners, and businesses conducting due diligence, source of wealth investigations or litigation support, the potential to identify the true ownership of vast amounts of property represents a significant achievement.

For the third year in a row, Vcheck Global has been ranked among the top 3% of fastest-growing companies in the Pacific region, according to the Inc. Regionals: Pacific list released by Inc. Magazine this month. The annual list features top companies based in California, Washington, Oregon, Hawaii, and Alaska that are drivers of economic growth and new job creation.

Vcheck Global, which ranked 121 on the list, continues its rapid-growth trajectory in 2022 having added top talent to further accelerate business after building the team to more than 180 dedicated employees and investing in its cloud-based SaaS platform for third-party risk management, Vcheck RED.

According to the 2022 Inc. Regionals: Pacific rankings, the top 150 economic all-stars, which includes Vcheck Global, represent $3.7 billion in revenue and nearly 8,000 new jobs in the past year. To view the full list of Inc. 5000 Regionals: California businesses and Vcheck Global’s company profile, visit https://www.inc.com/inc5000/regionals/california.

Introduction

Russia’s invasion of Ukraine has led to the imposition of some of the most aggressive, expansive, and coordinated sanctions ever by dozens of countries. These sanctions have come from places widely expected to take such action, including the United States, United Kingdom, and European Union, yet also from other countries taking actions almost unprecedented in their histories, including Singapore and Switzerland.

The impact of these sanctions on the Russian economy has been dramatic already, and with few signs of a Russian willingness to withdraw from Ukraine, the economic situation in the Russian Federation is likely only to worsen. The unprecedented breadth of sanctions, by some measures now turning Russia into the “most sanctioned country in the world” pose substantial challenges for U.S. and international businesses that have engaged in Russia, and those who may have entered into business with entities controlled by Russia’s oligarchs.

The importance of adherence with U.S. and international sanctions should be an integral part of any compliance program operated by a U.S. business, but the dramatic evolution of the sanctions picture in the last week may leave U.S. companies needing to take a careful review of their third parties, business partners, or joint ventures to ensure that they are in compliance with the latest developments.

The Limits of List-Based Reviews

All compliance tools rely primarily on data from lists published by a variety of U.S. and foreign governments, including the U.S. Office of Foreign Asset Control (OFAC), Global Affairs Canada, the United Kingdom’s Treasury and the European Commission. These tools allow compliance professionals to easily run the names of business partners (both individuals and entities) against the lists compiled by these (and other) organizations to identify businesses they are required to avoid. However, these tools are far from infallible and should be regarded as only one pillar of a comprehensive sanctions compliance program. Many companies have run afoul of sanctions by relying solely on the electronic review of their third parties, with even the highest tech companies such as Apple being forced to settle with the U.S. government after dealing with a Specially Designated National (SDN).

The addition of multiple new individuals to U.S. SDN lists and their international equivalents necessitates that companies reassess their affiliates to ensure that their business partners haven’t joined the ranks of the sanctioned, but such a review will not alone be able to overcome ownership-based sanctions that form a key part of OFAC’s 50 percent rule.

Enhanced Due Diligence Necessary for Sanctions Compliance

While sanctions screening tools can help companies avoid obvious offenders, a more comprehensive sanctions due diligence approach is often warranted. OFAC’s much vaunted “50 percent” rule means that any entity in which 50 percent or more is held (directly or indirectly) by a sanctioned individual or entity is regarded as sanctioned by virtue of its ownership. This rule can substantially complicate the issue of sanctions compliance, and can require extensive public records, open source, and human intelligence work to verify whether entities with complex or opaque ownership structures are subject to sanctions. Similar rules exist in other international sanctions structures as well, with the U.K. Treasury’s rules related to “control” arguably being even more expansive.

For companies that have engaged in extensive business in Russia, with Russian companies or high-profile Russian individuals (oligarchs, “minigarchs” etc.) there is likely substantial need to urgently review third parties, joint-venture partners or investments to ensure that their current status isn’t in violation of U.S. or international sanctions. As the U.S. and international sanctions picture continues to evolve over the coming weeks or months, companies will need not only to review existing relationships, but consider more stringent initial due diligence checks on partners and customers to ensure that they are maintaining strict adherence to global sanctions regimes.

Entering 2022, reflection on the plethora of challenges confronting the global economy over the past two years, particularly during the spring of 2020, illuminates one bright spot—the rapid ability of certain industries to pivot and remain operational. Especially memorable was the transition of restaurants, within several weeks, to selling groceries and meal kits. In the short term, this flexibility served as a lifeline, allowing some businesses to remain operational, retain employees, and maintain relationships with their customers. Such quick and innovative thinking is vital for long-term success across disparate industries, including investigative due diligence. By embracing change and prioritizing client concerns, due diligence providers are able to thrive while bolstering their customers with the actionable intelligence necessary to flourish in their respective industries.

“Think twice before you tweet.”

This is the latest C-Suite mantra. Consider the case of Just Eat Takeaway CEO Jitse Groen whose tweets in 2021 were deemed by activist investors (including Uber CEO Dara Khosrowshahi) as having caused the company to be “deeply undervalued and vulnerable to take-over bids well below its intrinsic value.” The ability of executives to suddenly implode their companies with an ill-considered social media post makes social media screening a critical component of an investigative due diligence report. While analysts were formerly able to manually review social media content, the sheer volume of posts created by individuals today requires a technological approach to mitigate a technological problem. This is where AI social media screening shines since it can condense a typical individual’s expansive online footprint into a highly focused report for a trained investigator to analyze for reputational risk issues.

“I feel the need, the need for speed.”

First said by Tom Cruise’s character Maverick in Top Gun, this sentiment is echoed by decision makers in industries ranging from private equity to commercial real estate. A traditional challenge for due diligence providers has been balancing the time commitment necessary to complete an impactful investigation with the ever increasing speed of business. Meeting this challenge is where investigative specific screening solutions such as Vcheck RED excel. In addition to providing instant due diligence to meet immediate client needs, Vcheck Red’s client focused features include ongoing monitoring and the ability to instantly escalate automated results to a deep-dive analyst driven investigation. In business environments where time is money, ongoing automated monitoring protects profits by raising real time alerts tailored to a client’s specific intelligence needs.

“An ESG Reckoning Is Coming.”

This was proclaimed by the Harvard Business Review in March. To best serve rapidly evolving client priorities including ESG (Environmental, Social, and Corporate Governance), diligence providers must be willing to dedicate the time and resources to spot and evaluate market issues. This investigative mindset goes hand-in-hand with possessing the flexibility to adapt existing techniques to contemporary concerns and while encouraging continuous employee innovation. Vcheck has a demonstrated track record of utilizing innovative technology attuned to client needs while strategically infusing analyst driven investigative techniques including expertly conducted human source inquiries with contemporary industry insights. Our analysts are cognizant of ESG issues ranging from erosion concerns in the Sahara to anticipated changes to the UK’s privacy laws in the wake of Brexit.

“Investors want to better understand one of the most critical assets of a company: its people” SEC Chair Gary Gensler tweeted this in August. DEI (diversity, equity, and inclusion) has quickly become a priority for both providers and consumers of investigative due diligence. To this end, due diligence investigators must be attuned to spotting both existing DEI issues as well as identifying future matters of client concern. This entails investigative fingers on both media and regulatory pulses while possessing a sound understanding of a subject’s industry, local laws, and social climate as well as client business objectives. On the provider side, investing in exceptional analysts is essential for obtaining an industry edge. Analysts proficient in a variety of languages, trained in regional studies, and benefiting from overseas experience, such as Vcheck Global’s Investigative Team, provide clients with impactful insights tying together diverse and seemingly disparate findings including corporate registrations, legal records, and media mentions. Consider that while a subject located abroad may not be running afoul of local laws, regulations, or social contracts, their actions may raise significant concerns by investors, business partners, and the general public in other countries.

In the same spirit as the restaurant industry’s innovation in spring 2020, the fluid nature of global regulatory and social environments necessitates timely and strategic adaptations by providers of investigative due diligence. By closely monitoring various industries and countries while prioritizing human talent supported by innovative technology, Vcheck Global provides its clients with impactful information reflecting today’s realities with an eye toward tomorrow. Reach out to Vcheck Global to learn how our actionable intelligence can enhance your decision making.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

Vcheck Global accelerates market leadership with the key appointments of Katy Thomas as Chief Information Officer and Alex Sorin as Vice President of Global Diligence Markets.

“Vcheck Global has been in a sustained period of incredible growth, having demonstrated our dedication to consistently high-quality research, on-time delivery, and turnaround times that meet the needs of clients with increasingly tight deadlines,” said Julie Peck, CEO of Vcheck Global. “Our deep level of engagement with our clients has given us not just the opportunity to serve them better than anyone else in this industry, but also the chance to gain unique insights into what can and should come next in this industry as the global risk environment evolves at record pace. We’re thrilled to have talent with as much seasoned experience and passion for innovation as Katy and Alex in these key roles.”

Read the full announcement here.

The rapid disintegration of Afghanistan’s security forces in August left casual news observers aghast. How could forces trained and equipped by the world’s most powerful military collapse within days of President Joe Biden’s April withdrawal announcement? The answer lies in a culture of corruption extending from Afghan forces to American military contractors, cracking the foundations of U.S. financed reconstruction efforts. These structural shortcomings expanded, undermining institutional integrity to such an extent that Afghan security forces, described by NPR as having been “held together by duct tape and glue,” were toppled by the Taliban with minimal combat.

A widespread phenomenon hindering the efficacy of the Afghan forces was the “ghost soldier” scam. This refers to the reporting of non-existent personnel by Afghan military leaders. These corrupt commanders lined their pockets with the money allocated by the United States for the ghost soldiers’ salaries. In addition to diverting funds intended to bolster the Afghan forces, this fraud undermined morale of Afghan army recruits and the Afghan people’s support of their security forces. The Afghan people viewed many military and police leaders as prioritizing personal profit over public service. Additionally, the ability of the Afghan forces to appoint qualified leaders was hampered by cronyism, which further undermined the confidence of enlisted fighters and the civilians they were charged with protecting.

While senior leadership of the Afghan security forces profited through the ghost soldier scheme, the Taliban compromised the combat ability of rank-and-file troops and police officers through bribery. Reports of Afghan security forces abandoning U.S. provided military equipment were common. The bribery was not limited to the procurement of military issue weapons, with reports of the Taliban paying Afghan forces to go absent without leave and switch sides. Interestingly, some army deserters told CNN in 2016 that they were not motivated by money, rather by their disenchantment with the Afghan military, saying, “The army let us down, so we had to come to the Taliban, who treat us like guests.”

When not combating criminal activity, the Afghan police forces were frequently committing it. Upon assuming command of the Afghan police in 2019, chief Khoshal Sadat told Reuters how “he had sacked 30 of 34 provincial police chiefs for incompetence or corruption since taking charge, replacing them with young Special Forces officers in his own mould.” Sadat added that by reducing the number of roadside checkpoints manned by the police, he denied corrupt police opportunities to extort money from truckers, who played a vital role in maintaining supply chains throughout the large country.

Bad behavior was not limited to the recipients of U.S. military aid; American service members and contractors in Afghanistan were charged with accepting bribes. In one publicized incident, the owner of an Afghan trucking company conspired with American soldiers to create fake logistics missions and steal fuel. In his book The Broken Contract, Saqib Qureshi explains how private contractors were the ultimate victors of America’s two-decades investment in Afghanistan. Reflecting on the plethora of conversations about America’s withdrawal, Qureshi says, “what is curiously missing from much of the conversation is how this failed war had been extensively outsourced to nontransparent and unaccountable actors.”

America’s withdrawal from Afghanistan highlights how non-combat issues such as fraud and corruption can pose a greater threat to military operations than enemy forces. Notably, the aforementioned instances of fraud and corruption underscore the ability of malfeasance to undermine institutional integrity. In the case of Afghanistan, greed contributed to the collapse of the Afghan army and ultimately, the government of President Ashraf Ghani. As the American military incorporates the lessons of the past two decades into its strategic planning, fighting fraud and corruption will hopefully be included in revisions to the Counterinsurgency doctrine. It will be interesting to see if The Broken Contract gets added to the U.S. Military Academy’s Commandant’s reading list.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

A recent Wall Street Journal article spotlighted a series of legal cases with a common aim—requiring private equity firms to accept responsibility for the actions of their portfolio companies. Author Chris Cumming notes that the settlements in these matters “mark a break from the usual practice of treating private-equity firms as passive investors that aren’t liable for misconduct by companies they own.”

While the trend of laying responsibility for the actions of acquired companies on private equity firms is a fairly recent Department of Justice (DOJ) move, the source of the charges is positively historic. To prosecute private equity firms, government attorneys are relying on the False Claims Act, which was introduced in 1863 at the height of the Civil War. The DOJ’s commitment to prosecuting False Claims Acts cases is underscored by its records for fiscal year 2020 during which the department recovered more than $2.2 billion in settlements and judgments through civil cases.

Though the majority of recent False Claims Act suits have involved the medical sector, risk to private equity investors reaches much wider. Notably, “any private-equity firm whose investments touch the federal government—from defense contractors to infrastructure-construction companies—could potentially be at risk,” according to attorneys contacted by the Wall Street Journal. In a June 2020 speech before the U.S. Chamber of Commerce’s Institute for Legal Reform, then Principal Deputy Assistant Attorney General Ethan Davis advised private equity firms to be cognizant of anti-fraud laws and regulations. Davis’ warning that the actions of acquired companies can expose private equity firms to False Claims Act liability captured the attention of both at-risk investors and opportunistic legal professionals.

An interesting aspect of False Claims Act litigation dating back to its wartime origin is its provision for awarding whistleblowers. This aspect of the law has not only survived several revisions but has seen an increase in whistleblower incentives. The Wall Street Journal article highlighted a whistleblower lawsuit filed in 2015 by an employee of a Massachusetts mental health treatment provider previously owned by a Miami-based buyout firm, H.I.G. Capital. Allegations of poorly trained and inadequately supervised employees resulted in $6.75 million in payments to the whistleblower out of a total payment of $25 million following six years of litigation. Commenting on the lawsuit, attorney Alexander Owens warned in the article that the size of the payment to the whistleblower “may have a ‘blood in the water’ effect in incentivizing future investigations and lawsuits in the [private equity] space.”

The uptick in False Claims Act suits combined with the eye-opening whistleblower awards arising out of these matters emphasizes the need for private-equity firms to know their investments inside and out. In consideration of the influential role played by whistleblowers in cases charged under the False Claims Act, special precautions should be taken by private equity investors when conducting pre-investment due diligence with the aim of sussing out internal issues that could prove problematic down the line.

Especially pertinent is the need for prospective investors to obtain an understanding of both current and former employee attitudes concerning their acquisition target. This can be accomplished through human intelligence, namely the use of discreet source inquiries. When pursuing this strategy, it is advisable to cast as wide a net as possible to cover all levels of the employee hierarchy. Similarly, opinions should not be restricted to a single department but represent the diversity of the subject entity’s business lines. While specialized efforts increase both the cost and delivery time of a due diligence investigation, such inconvenience pales in comparison to the expense, time commitment and lost business opportunities resulting from involvement in False Claims Act litigation.

Enhance your company’s pre-acquisition business intelligence by partnering with an award winning due diligence provider. Reach out to Vcheck Global to gain the peace of mind afforded by the exhaustive reporting of experienced investigators equipped with industry leading technology and a commitment to client satisfaction.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

Brazil’s Public Prosecutor’s Office (MPF) formally closed Operation Car Wash (Lava Jato), the epic corruption investigation which began in 2014 with a routine money laundering probe of an actual car wash in Brasilia. The investigation, which ended in February, quickly grew into a complex series of criminal prosecutions that snared former-President Lula da Silva as well as dozens of high-ranking federal officials and some of Brazil’s most prominent business figures. Since 2014, Car Wash has resulted in hundreds of arrests and prison sentences as well as billions of dollars in combined fines involving political elites and companies in nearly every country in the Americas.

Brazilian legal experts and political commentators have mixed opinions of Car Wash’s legacy on anti-corruption efforts in Brazil. In one sense, Car Wash succeeded by demonstrating that it was possible to hold powerful politicians and billionaires accountable for wrongdoing and that prosecutors could at least confront and expose, if not destroy, the entrenched culture of grand corruption in Brazil. The campaign was popular with a broad cross-section of Brazilians, keeping with a continent-wide trend of popular disgust with entrenched cultures of corruption among the Latin American political class. The MPF also developed deeper and broader ties with local law enforcement agencies as well as prosecutors in the U.S. and Europe, leading to better information-sharing and coordination to prosecute wrongdoing by multinational firms. The willingness to go after corruption at the highest level is exemplified by a Brazilian Senate committee’s recent report recommending an indictment of President Jair Bolsonaro for crimes against humanity and mismanagement of the coronavirus pandemic.

On the other hand, critics of Car Wash question the tactics employed by prosecutors, such as the extensive use of preventive detention to hold suspects while prosecutors gathered additional evidence and the offer of plea agreements to obtain cooperation from key witnesses. This later development is a novel innovation in Brazil’s legal system and remains controversial. Several high-profile convictions of politicians, including Lula, were later overturned by courts on technicalities.

There is also an open question of whether Brazilians are simply exhausted by seven years of near-constant Car Wash revelations. The reputation of popular Car Wash judge Sergio Moro took a significant hit after The Intercept leaked messages indicating that Moro may have improperly influenced the investigations into Lula and other political figures. Brazil’s score decreased by five points in Transparency International’s 2020 Corruption Perceptions Index compared to 2012, indicating survey respondents actually perceive the country to be more corrupt than when Car Wash began.

Despite these caveats, experts agree that Car Wash and the 2014 Anti-Corruption Law (commonly referred to as the Clean Companies Act) have had dramatic ramifications for companies operating in Brazil. The most important culture change is the normalization of compliance procedures among Brazilian firms. Prior to 2014, only multinationals typically had these measures in place. In addition, the harsh penalties stipulated by the Anti-Corruption Law have incentivized companies to cooperate with prosecutors in exchange for reduced fines and sentences, in contrast with the previous tendency for companies to simply deny wrongdoing and drag out court proceedings as long as possible. Brazil’s Comptroller-General (CGU) has also emphasized that proper implementation of a robust compliance program is a key factor in its decision-making on potentially reducing or waiving fines against companies found guilty of violations. Moro, who is now in private practice, commented at an October 2021 legal industry event that companies should proactively collaborate on proposing joint compliance standards, rather than hoping that individual firms act as “islands of integrity” or waiting for the government to make formal rules.

In December 2020, several enforcement agencies announced a five-year Anti-Corruption Plan that calls for enhanced inter-agency cooperation and further centralizes anti-corruption enforcement under the CGU. Notably, the MPF did not participate in the government’s announcement of the plan and has not agreed to cede authority to the CGU on negotiating plea agreements. The extensive proposals in the plan, such as the creation of public databases of politically exposed persons (PEPs) and public procurement invoices, nevertheless represent a commitment by the Brazilian government to continual improvement and scaling up of compliance and anti-corruption measures.

Car Wash as a discreet investigation may be over, but it kicked off a cultural shift towards compliance and an ongoing wave of enforcement changes in Brazil. Companies operating in the country should be ready to maintain and expand their due diligence procedures for third parties and clients.

For your international due diligence needs in Brazil, turn to Vcheck Global. Our analysts have the Portuguese language skills and in-country experience to navigate post-Car Wash compliance and reputational risks.

Jon Ettinger is a Senior Associate at Vcheck Global.

Sunstone Partners announced today its strategic growth investment into Vcheck Global to accelerate development of products and technology for delivering game-changing due diligence and background investigation solutions.

“Vcheck Global has experienced unprecedented growth over the last few years and we have an incredible opportunity to truly change the game for lenders, investors, risk and compliance leaders and supply chain managers across the globe,” said Vcheck CEO Julie Peck. “The Vcheck team believes that Sunstone’s investment approach and partnership model will help us accelerate the execution of our ambitious vision for delivering unmatched service and customer experience by the unique use of technology and an unwavering focus on the power of a flawless service experience. It was clear from our earliest interactions with Sunstone that their team shared our vision, stressing their desire to preserve our unique culture, relentless customer focus and superior investigative depth and quality. We look forward to partnering with them during this next exciting phase of Vcheck’s growth and innovation.”

Read the full announcement here.

The protracted Saudi-led takeover of the English soccer club Newcastle United came to an end last month when a consortium comprising the Saudi Public Investment Fund, PCP Capital Partners LLP, and RB Sports & Media Limited bought the Premier League club for GBP 300 million (USD 409 million). This purchase capped off an 18-month saga which began when the consortium initially reached an agreement with Newcastle’s former owner Mike Ashley in April 2020 before that deal collapsed.

The affair is notable for having reignited a long-running debate over state-ownership, political exposure, and the values of European soccer leagues and clubs that has been at the fore of the soccer community following similar big-ticket takeovers in the 2000s and 2010s. The controversial acquisition is a poster child for reputational due diligence in advance of major business transactions.

The consortium withdrew its initial bid in July 2020 over fears that it would not pass the Premier League’s owners’ and directors’ test, which outlines requirements that potential owners must meet in order to purchase a club. The test includes questions about criminal convictions, outstanding bans by sporting bodies, and breaches of certain soccer regulations.

A key sticking point during the initial failed bid was assurances that the consortium would act independently of the Saudi government, which wholly owns the Public Investment Fund. The Public Investment Fund, in turn, would be the 80 percent shareholder of the club if the takeover was completed.

Another issue was state-sponsored content piracy in Saudi Arabia amidst its ongoing diplomatic dispute with Qatar which began in June 2017. The kingdom turned a blind eye to illegal streaming of Premier League games in the country after it blocked the Qatari sports channel beIN Sports from broadcasting games in Saudi Arabia.

The rapid success of the consortium’s second bid rested on two important reforms. First, it was able to assure the Premier League that the Saudi government and Crown Prince Mohammed Bin Salman, who heads the Public Investment Fund, would not exert any control over Newcastle. Second, the government lifted its ban on beIN Sports and cracked down on illegal streaming in the country.

In the meantime, it appears that minority-shareholder Amanda Staveley, the chief executive of PCP Capital Partners who is well connected with the investment community in the Middle East, will act as the face of the consortium. On the day of the takeover, she gave an interview to Sky Sports, in which she spoke about the direction the new owners hope to take the club. Despite this, questions still abound as to how the club will operate independently of its majority shareholder.

While the sale was met with jubilation from Newcastle supporters, who had long grown tired of former owner Mike Ashley’s 14-year reign at the club, others were quick to criticize the sale. Perhaps the most vocal critic has been Amnesty International, which claimed that the takeover was an attempt to “sportswash” the Saudi government’s abysmal human rights record, which includes extrajudicial murder, jailing women’s rights advocates, and a disastrous bombing campaign in neighboring Yemen. The Crown Prince himself has been implicated in many of these violations, raising concerns about the Premier League’s new bedfellow. Amnesty International recommended beefing up the owners’ and directors’ test to include questions about human rights violations to prevent similar takeovers in the future.

The Newcastle takeover is the latest in a notable trend of European soccer club acquisitions by Gulf royalty. In September 2008, Sheikh Mansour bin Zayed Al Nahyan, a member of the royal family in Abu Dhabi, purchased Manchester City, turning the once small club into a European powerhouse in the space of a few years. Notably, Staveley was a key broker in Mansour’s takeover of the club.

Similarly in June 2011, Qatar Sports Investment, a fund established by the son of the emir of Qatar and heir to the throne Sheikh Tamim Bin Hamad Al Thani, acquired a 70 percent stake in French soccer giants Paris Saint-Germain (PSG). Qatar is also set to host the 2022 World Cup. Like their neighbor Saudi Arabia, both the United Arab Emirates and Qatar have been accused of serious human rights violations. These investments in soccer had less to do with turning a profit and more, as Tifo Football put it, to do with “reputation laundering, sportswashing, and a chance to offer an alternative story about the country to the rest of the world.”

At the same time as Gulf states pour money into European soccer, the global public is increasingly pushing for companies to properly vet their partners and institute environmental, social, and governance guidelines. This makes screening for adverse media coverage, politically exposed persons, and sanctions all the more important. However, based on the response Newcastle fans showed following the takeover and the recent successes of Manchester City and PSG, it may well be that the Premier League will not face any serious blowback from its customers for allowing acquisitions like the one witnessed earlier this month to proceed.

Regardless of how the public reacts, it is still in the interest of European soccer clubs and leagues to ensure they remain compliant with local and international regulations. To steer clear of unexpected complications in advance of your company’s upcoming deals, connect with a Premier League level provider of due diligence investigations. Vcheck Global offers your company the tools and insights to screen potential partners for deal-derailing issues including sanctions violations, political exposure, controversial affiliations, and other adverse media across multiple jurisdictions.

Adam Valavanis is an Associate at Vcheck Global.

In advance of the 2021 United Nations Climate Change Conference, the head of environmental group Greenpeace raised concerns about attendees “greenwashing” efforts. Greenwashing refers to the practice of intentionally misleading consumers about the environmental benefit of an offering; accusations of greenwashing have become commonplace. Just last month, McDonalds was on the receiving end of climate-related criticism following its announcement of plans to reduce global greenhouse gas emissions by 2050.

Since the term greenwashing was coined in the 1980s, it has largely been championed by the environmentally conscious public. However, the past year has seen regulators, both domestically and internationally, enter the conservation conversation. This uptick in activity is significant; it signals the need for both providers and consumers of reputational due diligence to factor greenwashing into their investigative priorities.

In August, the U.S. Securities and Exchange Commission (SEC) launched an offensive in the fight against greenwashing by opening an investigation into Deutsche Bank’s asset manager DWS. The American regulator wants to know how the German firm factored sustainable investing criteria into its asset management. This investigation is notable in that it represents the SEC backing its series of recent announcements around its intent to prioritize environmental, social, and governance (ESG) matters and climate risks with regulatory action.

2020 also saw significant anti-greenwashing activity across the pond. In March, the initial phase of the European Union’s (EU) Sustainable Finance Disclosure Regulation (SFDR) went into effect. Asset managers subject to EU regulation are now required to be transparent regarding sustainability claims. Required disclosures include policies for the integration of sustainability risk and how sustainability issues factor into activities, including advice to clients and internal decision making. The SFDR demonstrates the EU’s current and future commitment to combating greenwashing.

As the popularity of impact investing continues to rise, so does the incentive for companies in a variety of sectors to capitalize on consumer behavior. Unfortunately, this profit motive encourages malfeasance. Investors seeking to infuse investments with altruism and consumers wishing to align purchases with environmental concerns can reduce their chances of falling victim to eco-hucksters by pairing their passion for sustainability with skepticism.

To keep your investments and deals clear of climate controversy and its accompanying reputational and financial damage, connect with Vcheck Global. Our experienced investigators will cut through media hype and marketing manipulation to infuse your decision making with clarity and confidence.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

When moving between cultures, learning how to describe familiar things in a new way is a necessity. The thing called an apple, ringo, or pomme will be the same regardless of the word used to describe it, so the challenge becomes learning which word to use in which context. A version of this conundrum arises when working with Japanese companies. While they have individuals who oversee the overall and day-to-day operations, these individuals do not usually carry the CFO, COO, and similar titles used in U.S. businesses. In today’s global business environment, obtaining an understanding of Japanese corporate titles is imperative for both practitioners and consumers of investigative due diligence.

To begin, it is important to understand what legal entities operate in Japan. Under Japan’s Companies Act, two business types outside of partnerships are recognized: LLCs and corporations. According to Thomson Reuters’ Practical Law, as of July 2018 93.8% of companies in Japan are organized as corporations.

Under the Companies Act, Japanese corporations with boards of directors, which comprise the majority of Japanese companies, typically have one to three representative directors appointed by the board, depending on the type and size of the corporation. These representative directors have the authority to bind the company to contracts, are listed on the company’s filings in the official corporate register, and otherwise represent the company. The representative director will usually hold the title of president, CEO, or president and CEO in English. Note that these terms are interchangeable and simply denote the individual’s position at the top of the corporate hierarchy.

In Japanese corporate hierarchies, the executive vice president (“EVP”) is second to the president in seniority. It is common for these individuals to oversee the company’s day-to-day operations. Below the EVP are the executive officers, who are often arranged in multiple levels based on seniority. These individuals hold specific areas of responsibility equating to CFO, COO, and other roles which may or may not be described by the company. Outside of export-oriented companies, the use of such titles is uncommon.

For example, materials manufacturing company Mitsui Chemicals, Inc., which has three representative directors, lists a president and CEO who is a representative director, an EVP who is a representative director, two senior managing executive officers, seven managing executive officers, and then 17 executive officers. On the other hand, transportation company Kintetsu World Express, Inc. has one representative director who is also its president and CEO, an EVP, four managing executive officers, seven managing officers, and four officers.

The aforementioned examples demonstrate that it is possible, despite the lack of familiar titles, to determine the relative level of importance within a Japanese corporate hierarchy. The representative director or directors are the most senior individuals in the company, and hold legal responsibility for its actions. They serve on the company’s board and at least one will usually double as the company’s senior executive officer. Second in seniority is the EVP, followed by executive officers. They are arranged in levels based on seniority, with the number of individuals holding a title increasing as seniority decreases. Therefore, the managing executive and senior executive positions within Japanese companies often correspond most closely with the C-suite positions commonly used by U.S. businesses.

When examining a Japanese company, the representative director warrants primary interest, followed by the directors. Next come the remaining board members, the EVP, and senior executive. After these positions, however, responsibility within Japanese companies becomes more granular. At this level of the corporate hierarchy, consider selecting subjects based on their specific role within the company. If you have a need for a Japanese due diligence investigation, take advantage of Vcheck Global’s research team which leverages in-house foreign language capabilities, overseas experience, and regional academic focus. The team’s ability to seamlessly integrate hard and soft skills ensures your investigation extends beyond traditional diligence sources through the inclusion of extensive area knowledge.

Christopher Gearhardt is a Senior Associate at Vcheck Global. Christopher is fluent in Japanese, lived in Japan for eight years, and has written about Japan and East Asia academically and professionally.

A long-standing debate in the nonprofit sector is whether such organizations should operate like businesses. Regardless of one’s stance, few nonprofit professionals and volunteers will dispute the importance of protecting their organization’s reputation. Unfortunately, reputational risk mitigation is frequently not afforded the requisite level of attention required to protect nonprofits against a host of serious threats including employee, donor, and volunteer malfeasance. While no risk mitigation strategy can claim 100% efficacy, the deterrent factor is invaluable.

Commitment to their organization’s mission is a shared value of many nonprofit employees. Dedicated staff members are especially valued in the nonprofit sector where organizations typically operate under the mantra, do more with less. Unfortunately, the impactful work of nonprofit organizations is often used as a diversion by a small number of employees who engage in nefarious activities including fraud and theft. The damages caused by these bad actors can be threefold—reputational, financial, and legal.

In August, The Washington Post reported that an accounts manager of a nonprofit affiliated with the University of South Florida’s medical system admitted to having stolen nearly $13 million dollars over several years. Although it took several years, the manager’s superiors eventually grew concerned by increasing accounts receivable balances and launched an investigation which was escalated to the FBI. A statement by the university announced, “USF is a victim of a serious crime by a person who held a position of trust.” This incident highlights the need for nonprofits to thoroughly vett employees holding positions of trust, both prior to hiring and throughout their tenure.

Checks of senior nonprofit employees should be conducted randomly to catch bad actors off guard while being comprehensive in nature. Notably, the Association of Certified Fraud Examiners’ (ACFE) Report to the Nations 2020 Global Study on Occupational Fraud and Abuse revealed more than one-third of nonprofit frauds were committed by senior managers. One useful investigative tool is AI social media monitoring. While financially savvy fraudsters will typically employ various concealment strategies, their scams can be quickly unraveled by a sloppy social media post announcing an extravagant purchase or revealing a pattern of seemingly unusual behavior including a sudden passion for travel or signs of addiction.

Exploitation by donors with ill intent is another challenge,and is often overlooked by nonprofit organizations due to their reliance on fundraising. Prioritization of annual fundraising goals can lead organizations to intentionally ignore or look past red flags, such as an unexpected offer of a major donation from an unknown donor. It’s imperative for nonprofits to identify the identity, location, and affiliations of major donors to avoid becoming entwined in a money laundering or terrorist financing scheme.

While the hesitancy of many nonprofits to allocate hard-fought funding to the establishment of a risk mitigation program is understandable, such an initiative should be considered as an investment in the organization’s long term health, as opposed to an unplanned short term expense. Within the past year, the susceptibility of nonprofits to be exploited led to collaboration by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and Federal Banking Agencies to issue a joint fact sheet offering banks guidance in providing due diligence for nonprofit clients. Notably, the fact sheet advised applying a risk-based approach. One benefit of such a strategy for nonprofits is that it ensures risk mitigation spending is aimed at the organization’s most pressing pain points, as opposed to utilizing an overly broad approach without regard to an organization’s annual budget.

Not to be overlooked in risk mitigation efforts are an organization’s volunteers, with an emphasis on board members. Consider that at some nonprofits, particularly smaller ones, volunteers can have a significant impact on the organization’s operations, with responsibilities between lay and professionals frequently blurred. Similar to senior employees and major donors, board members warrant in-depth checks. Aside from having influence over strategic direction including budgets and fund allocation, board members often fill community facing roles, including being featured significantly in marketing materials. Not to be overlooked when vetting board members are conflicts of interest which can harm the organization’s reputation, erode organizational trust, and result in future legal consequences including voided agreements and financial penalties.

Accordingly, any misbehavior by senior lay leaders, both in the course of their organizational responsibilities or outside activities, can cause significant reputational harm. Gaining a balanced understanding of a board member’s reputation can be challenging, since individuals affiliated with other organizations with whom the individual is currently involved with, will typically be reluctant to share adverse information, due to concerns of harming their personal or organizational reputations. This provides an excellent opportunity to utilize discreet source inquiries to gain reputational insights of the lay leader from individuals operating in the same circles.
The thought of valued employees, donors, and volunteers causing significant damage is a troubling yet realistic threat to nonprofits. Protect your organization against reputational, financial, and legal threats by developing a risk mitigation plan. To learn more, reach out to Vcheck Global’s team of experienced due diligence investigators.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

Public records due diligence can be a powerful tool in assessing the reputation and business history of individuals and entities. An experienced research team can look past surface findings, following leads into corporate registration, legal, and media records, revealing previously unknown information about a subject. Due diligence is more than ticking a box; Vcheck Global’s experienced researchers follow the clues—and their expert instincts—wherever they lead. The following case study highlights the power of public records research combined with an experienced research team. This combination can uncover salient information providing clients with the necessary information to confidently conduct business.

A Vcheck Global client ordered a report in late 2020 on a seemingly low-profile individual (the Subject) associated with a number of healthcare companies in Florida, the majority of which were newly registered. In the course of investigator research, the Subject was linked to several other entities, including investment firms and a series of companies involved in metal alloys. Regarding the latter, court records indicated an overlap between the Subject and another individual (Individual Two), whom the Subject replaced as CEO for a brief period before resigning amidst a class-action lawsuit and related investigation into the company’s accounting practices (“the class action”). Individual Two, court records noted, had been charged with criminal fraud for their actions in a prior CEO role with a different company.

Notably, the Subject was a VP of the prior company as well, and their tenure overlapped with that of Individual Two. While it is not unusual for individuals in the same industry to work together in different roles, the similarities in the allegations levied against both companies, regardless of the fact that these companies shared little in common besides the Subject and Individual Two in management roles, raised red flags to Vcheck Global’s research team. In response, the research team noted the potential risk issue and set out to identify any additional affiliations between the Subject and Individual Two, beyond the scope of the research initially requested by the client.

The research team’s assumptions proved correct. While initial screenings uncovered only minor adverse information related to the Subject himself, the expanded research scope traced the Subject’s link to Individual Two back to the 1980s, when both individuals attended university together and even shared a major. From there, the duo worked together at several firms, with the Subject joining Individual Two at a financial company after graduating. Individual Two consistently held more senior roles with the Subject holding junior positions, which limited the latter’s exposure in media and litigation related to those companies. Furthermore, allegations of improper accounting followed the pair across multiple firms; including the fraud mentioned previously, and a settlement of the class action for $7 million. Additionally, posts on online message boards speculated about a scheme by Individual Two and their associates, including the Subject, to maintain control over the metal alloy company. While the posts contained little verifiable information, they were deeply critical of Individual Two, their family, and their associates.

But what had become of Individual Two since they were convicted? Individual Two left the metal alloy company in 2006 and was convicted of criminal fraud in 2011, only to resurface in 2017 alongside the Subject in SEC filings, and again in 2019 in court documents that, once again, named the duo—suggesting they were improperly infringing on the metal alloy company’s trademark by operating an unrelated company under the same name. An unusually sparse LinkedIn profile matching that of Individual Two listed them as a managing director of one of the Subject’s most recent medical industry affiliations.

This information, along with the knowledge of both individuals’ shared history, shed new light on an otherwise unextraordinary subject. These revelations allowed the client to make a fully informed decision about exactly with whom they were partnering, despite their interactions having been limited to the Subject. Contact Vcheck Global today to learn how due diligence investigations can help you mitigate risk at your firm.

Maxine Janerka is a Senior Associate at Vcheck Global.

A 2020 client letter by Blackrock CEO Larry Fink which announced the firm’s belief “that sustainability should be our new standard for investing” is notable for bringing environmental concerns to the forefront of investor considerations. Similarly, a recent hiring wave of Chief Diversity & Inclusion Officers by corporate powerhouses highlights the prioritization of DEI (diversity, equity, and inclusion) considerations by investors. This focus is reverberating throughout adjacent industries, including investigative due diligence.

As 2021 winds down, focus on DEI issues within the diligence industry ramps up and should be at the forefront of investigative offerings and client considerations. Notably, neglecting DEI issues carries significant risks to businesses of all sizes. These risks are not restricted to a handful of countries or industries. Incorporating DEI considerations into investigative due diligence investigations hedges against the following risks:

Reputational Risk

A January 2021 study by McKinsey & Company found that “The business case for increasing diversity and inclusion is indisputable.” For due diligence investigators, this means reviewing media and legal records with a DEI lens. Consumer reviews alleging discrimination and litigation findings pertaining to unfair hiring practices warrant immediate client notification. Identifying subjects with poor DEI track records prior to closing a deal or extending an offer of employment can prevent future costly discrimination claims and public outrage.

Regulatory Risk

A March 2021 speech by FCA CEO Nikhil Rathi, announced the regulator’s intent to hold firms accountable for diversity improvements at senior levels. It behooves companies to stay ahead of this regulatory transformation. Identifying upcoming regulatory issues early on reduces a company’s chance of attracting negative regulatory attention while gaining an opportunity to positively differentiate from competitors’ failure to adapt.

Business Continuity Risk

Failure to comprehensively vet corporate leadership from a DEI perspective can result in a C-Suite void whose effects ripple throughout the organization. Consider last month’s resignation of Time’s UP CEO Tina Tchen following the revelation of ties to the sexual harassment scandal of former New York Governor Andrew Coumo. In an August 2020 HRDIVE article, Ramcess Jean-Louis, global head of diversity and inclusion at Verizon Media, emphasized that “It would be counterproductive to have a succession plan without a D&I focus.”

Third-Party Risk

With so many corporations reliant on outside partnerships, DEI considerations must extend to third-party relationships. Evaluating the risk of third parties safeguards a company’s reputation and profitability against irreparable damage. Having a thorough understanding of a firm’s vendors, partners, and clients, has gone from being a compliance suggestion to a necessity.

Employee Satisfaction

The June 2020 resignation of Adidas’ global head of human resources, Karen Parkin, following employee calls for her resignation over dissatisfaction with the company’s approach to addressing workplace racial grievances, is indicative of employer’s support for staff concerns regarding DEI issues. The importance of positive employee feedback is underscored by the hiring challenges across a variety of industries. Similarly, as millennials and Gen Z climb corporate ladders, they look to work for and lead organizations committed to diversity, equity, and inclusion.

Strategically incorporating DEI considerations into your firm’s risk management strategy carries dual benefits. First, it allows for the early identification and prevention of reputational and legal issues. Secondly, it demonstrates commitments to employee and client values.

Ready to learn more about incorporating DEI insights into your investigative goals? Contact Vcheck Global to kick-off an investigative due diligence program or to enhance existing investigative capabilities.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

For most high school juniors, the college admissions process involves enrolling in an SAT prep course, meeting with their school’s college advisor, and anxiously awaiting the admissions committee’s decision email. As viewers of the recent hit Netflix documentary Operation Varsity Blues: The College Admissions Scandal know, the hurdles of college admissions can be jumped. Hollywood stars Lori Loughlin and Felicity Huffman demonstrated that securing your child’s acceptance to a prestigious school can be accomplished by employing seasoned fraudsters to bribe admissions officers, tamper with entrance exams, and falsify athletic achievements.

The Operation Varsity Blues scandal revealed a profusion of failures by leading universities, including Harvard, Yale, Stanford, Northwestern, and Georgetown, to proactively manage their reputational risk. The effects of the institutions’ complicity in the admissions scandal will reverberate for years to come as donors redirect giving and a generation of applicants question the fairness of the admission system. Notably, the due diligence oversights revealed by the FBI’s investigation necessitate commitments by universities to proactively mitigate applicant malfeasance and uphold school reputations.

One component of the Operation Varsity Blues scandal was especially preventable given a modicum of effort by the involved universities—the falsification of athletic achievements. Had admissions officers made minimal efforts to review publicly available high school varsity sports rosters or quickly reach out to the respective athletic departments prior to issuing valuable athletic scholarships, the ruse would have quickly unraveled. Similarly, conducting media screening of applicants would have dispelled the fraudulent claims.

Social media has proven to be a reputational risk minefield for higher education institutions. According to a 2020 Inside Higher Ed article, some admissions officers are conducting rudimentary social media searches of applicants. Interestingly, the article notes this number increased from 2019, indicating a rising interest in social media screening. While an informal manual review of an applicant’s Facebook page may have previously sufficed to provide insight into their extracurricular activities, the sheer volume of posts across multiple platforms created by young adults today requires a technological approach to mitigate a technological problem.

While overwhelming at first glance, AI social media screening provides an efficient and cost effective solution for admissions offices to reveal notable findings, potentially averting a future reputational risk crisis. A significant advantage in utilizing an experienced investigative firm to conduct social media screening is the confidence of knowing the process is being conducted above-board, with legal and technical expertise being leveraged. This includes restricting research to open source records and knowing what technology is permissible (Vcheck Global’s AI social media reporting) and what technology is off limits (password cracking).

Aside from admissions offices, another university department standing to benefit from risk mitigation strategy is athletics. Many colleges and universities rely heavily on their revenue generating sports programs to fund less popular athletic offerings. Moreover, the game-day revenue generated by popular athletic programs, such as football and basketball, constitutes a significant revenue stream for local businesses, including restaurants, bars, and hotels. Accordingly, conducting thorough due diligence of scholarship athletes is a proven tactic for avoiding future reputational repercussions. Consider the 2020 incident where a high school lacrosse star had a Division 1 admissions offer and athletic scholarship revoked shortly after posting a racially charged social media post. Had the university failed to act prior to enrolling the student and similarly contentious social media post been made, the university would have been the target of national condemnation.

While “Operation Varsity Blues” received significant public attention, a more alarming scandal involving a prominent American university flew under the public radar. Last year, the Department of Justice (DOJ) charged the Chair of Harvard University’s Chemistry and Chemical Biology Department with failing to disclose financial support from the Chinese government. The charges, which arose from a federal investigation code named “Lurking Giants,” triggered a wave of concern which rippled throughout the nation’s preeminent research institutions. As universities consider proactive measures to avoid future espionage entanglements, one preventative measure lies in the utilization of discreet source inquiries prior to appointing faculty members to head sensitive departments, such as those in the hard sciences. This method is ideal for uncovering corruption and other risk issues in jurisdictions with opaque public records, such as China.

In addition to espionage threats, institutions of higher education must also be cognizant of being wittingly or unwittingly used to launder money. Just last year, Harvard and Yale were accused of failing to disclose significant donations from foreign donors. This led the Department of Education (DOE) to, in the case of Harvard, question the university’s institutional controls. In keeping with the storied Harvard-Yale rivalry, the DOE requested that Yale provide records of all gifts and contracts from China and Saudi Arabia. Notably, a DOE official warned that donations from China “can compromise academic freedom.”

American universities are advised to take a page from their neighbors to the north who have been grappling with concerns pertaining to corruption and money laundering stemming from the enrollment of “politically-exposed students from corruption-prone jurisdictions like Russia, China, Nigeria.” Schools can limit their exposure to tainted funds through the creation of customized due diligence programs incorporating screening of anti-money laundering, politically exposed persons (PEP), sanctions, watchlists, and adverse media. The use of automated risk screening such as that available through Vcheck RED keeps costs low while allowing for issues of concern to be escalated to a comprehensive analyst driven investigation.

Universities seeking to avoid a starring role in an upcoming Netflix documentary spotlighting bad actors among their staff and students should consider implementing or overhauling their risk mitigation programs. Instead of waiting for a major donor to redirect a gift, a star athlete’s problematic social media history to make headlines, or your school to be complicit in a money laundering scheme, consult with Vcheck Global’s investigative professionals today to proactively protect your school’s reputation.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

In February 2021, then-SEC Chair Allison Herren Lee announced the agency’s intent to update its guidance regarding disclosure related to climate change matters initially issued in 2010. Subsequently, in March, the SEC responded to increased investor demand for disclosure information pertaining to environmental, social, and governance (ESG) matters and climate risks by announcing the creation of a Climate and ESG Task Force in the Division of Enforcement. May saw the new SEC Chair Gary Gensler state the agency’s intent to propose a rule requiring the disclosure of “human capital” metrics. Notably, Gensler described this diversity, equity, and inclusion (DEI) initiative as “one of my top priorities.” While this trifecta of SEC activity did not result in the appearance of an ESG-themed dress at the recent MET Gala, it piqued the interest of investigative due diligence firms.

In skipping the kiddie pool and diving into the deep end of the ESG conversation, the SEC has conferred gravitas to the topic which was lacking in the United States. While the UN launched the Principles for Responsible Investment (UNPRI) as early as 2006, and the EU announced an action plan on sustainable finance in March 2018, a dearth of governmental regulation left American companies directionless regarding ESG reporting. Notably, the SEC’s involvement will spur ESG considerations by companies previously unconcerned with such issues or those which had adopted a wait and see approach. While not the SEC’s intention, a benefit of compliance with recent SEC ESG requirements is the ability of American companies operating internationally to better comply with existing and emerging foreign regulations.

Especially notable amongst the SEC’s recent ESG activity is Chair Gary Gensler’s clear commitment to DEI issues. While the August 2020 modernization of Regulation S-K rules required registrants to describe their human capital resources, reviews of Form 10-K filings in the following months revealed the change left registrants with many questions, including uncertainty regarding the level of detail sought by the SEC. Notably, it remains to be seen how aggressive the SEC will become in determining if registrants’ disclosure information is sufficiently thorough. However, Chair Gensler’s personal focus to make DEI issues a priority for SEC registrants signified that the topic is not merely regulated to a passing press release. The activity by both outspoken SEC leadership and the agency’s rank-and-file policy staffers emphasises the need for due diligence consumers to obtain an awareness of potential ESG trouble spots concerning future investments, partnerships, and executive hires.

For SEC registrants unmoved by the agency’s recent ESG and DEI actions, the 2022 Congressional Elections and 2024 Presidential Elections will play a crucial role in determining the incorporation of ESG and DEI considerations into their corporate strategy. It remains to be seen if holdout companies can wait out the current SEC agenda. However, even if the prospect of continued SEC activity does not effect change, consumer pressure concerning social and environmental issues is crossing partisan lines. In doing so, public preference is undermining wait and see approaches to organizational reporting on ESG and DEI issues.

For consumers of investigative due diligence interested in following the SEC’s lead and incorporating ESG and DEI considerations into their future plans, working with a seasoned investigative firm confers several immediate benefits. First, it leaves an audit trail. This is vital for making the company’s commitment to ESG and DEI issues known to regulators, stakeholders, employees, and the general public. Secondly, it opens eyes to previously unconsidered areas of concern including adverse media, regulatory issues, legal trouble and problematic industry affiliations. Interested in learning more? Reach out to Vcheck Global to learn how we can allay your ESG and DEI concerns using a combination of automation, artificial intelligence, and analyst driven research.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

Illuminating adverse information, regulatory actions, and litigation in complex jurisdictions is vital for companies operating internationally. Yet English language media, regulatory, and litigation checks conducted by ill-equipped investigators often fail to provide a comprehensive understanding of the risks potentially inherent in engaging with individuals who have lived or worked abroad. Vcheck Global’s many experienced researchers incorporate diverse jurisdictional knowledge and language skills when conducting investigative due diligence worldwide, delivering critical information to help your company mitigate risk.

The necessity of properly staffed international investigations is illustrated by a recent Vcheck Global engagement into the principals of a newly formed Special Purpose Acquisition Company (“SPAC”) operating in the cryptocurrency space. This unique project required research on several principals operating within both a SPAC company—a company type which may be rife with potential regulatory and reputational pitfalls—as well as the cryptocurrency space. The nascent regulatory stages of cryptocurrency continues to trigger investor alerts concerning potential regulatory dangers due to the opportunities for bad actors to operate within the sector. Gregory Markou, co-founder and CTO of Toronto-based blockchain company ChainSafe Systems, highlights the importance of due diligence in the cryptocurrency space. Markou explains, “traditionally most well-funded startups are comprised of proven track records. With crypto, the borders broaden; teams are made up of individuals from around the world—some of whom have never met. It’s important that Investors thoroughly research the teams, not just the product.”

The first red flag of this project was raised by preliminary searches; one subject was identified as having been previously affiliated with unsavory characters. These relationships posed potential criminal and reputational risks to Vcheck Global’s client. In response to the preliminary findings, the investigation’s scope quickly expanded past the U.S. jurisdiction initially requested into Spanish source research. Vcheck Global’s subsequent targeted research in both Spanish and English revealed concerning records pertaining to both litigation and media coverage. These findings illuminated the subject’s professional affiliation with individuals who committed serious crimes as well as having masterminded a massive cryptocurrency scam which defrauded its investors. The ability of Vcheck Global’s researchers to quickly pivot by expanding the project’s geographic scope, while conducting in-house foreign language research, ensured a comprehensive analysis of the reputational risks associated with the client’s proposed engagement.

In addition to the aforementioned adverse findings identified through Spanish source research, Vcheck Global’s investigation identified Hebrew language records involving another subject associated with the SPAC. Notably, this individual, whose name was not included on politically exposed persons watchlists, was identified through in-house Hebrew research as having ties to politicians in Israel. These findings alerted Vcheck Global’s client to the potential political risks of conducting business with the additional subject.

This project highlights common challenges posed by subjects with global footprint. Successful navigation of international engagements requires a research team possessing high-level linguistic and geopolitical expertise. Notably, had this engagement been restricted to standard public records research, the resulting report would have contained minimal coverage of the political ties and business affiliations which ultimately affected the client’s decision making. These pain points were exposed by Vcheck Global’s comprehensive research across multiple jurisdictions, including the research teams’ ability to navigate complex and high-risk industries in several languages.

To infuse your next international engagement with the regional and linguistic knowledge of experienced international diligence experts, contact Vcheck Global.

Guy Talmor is an Associate at Vcheck Global.

Cryptocurrency and its underlying blockchain technology is becoming increasingly mainstream, attracting an uptick in consumer participation in crypto markets and interest from traditional equity firms and institutional investors. However, excitement about the possibilities of this technology should be tempered with an abundance of caution. Digital assets are easy targets for bad actors who can drain the wallet of the unwitting consumer and represent a potential reputational risk for companies and institutional investors.

There are several reasons why this is the case. First, the public has a generally poor understanding of how cryptocurrencies, digital assets, and the blockchain itself work. See the multiple bemused explainer articles about NFTs as a prime example. As with any new technology, this presents an opportunity for scammers to exploit the idea that a seemingly magical bit of code can yield enormous returns on minimal up-front investment. In addition, paid promotion by celebrities and the endorsement of influential executives has rapidly expanded the visibility of cryptocurrency from enthusiast Reddit threads to national media outlets and the boardrooms of prominent financial institutions. At the same time, regulators are only beginning to address the gaps in traditional financial market and commodities rules where cryptocurrency and other digital assets currently roam free. The confusing patchwork of regulatory agencies that potentially have a hand in overseeing various aspects of the crypto market has thus far limited enforcement capability, with some exceptions. Perhaps most appealing to the aspiring crypto con artist is the fact that while transactions can be reversed or traced with expert or law enforcement assistance, it is much more difficult for the average crypto buyer to redress a fraudulent transaction on their own. The lack of government backing for digital currencies also means there is no established safety net for victims to guarantee the reimbursement of fraudulent transactions, in contrast to credit cards or traditional bank accounts.

This Wild West environment has made some people rich, but has also resulted in heavy losses for thousands of consumers and investors. According to the Federal Trade Commission, consumers reported $80 million in losses on crypto scams between October 2020 and May 2021. Recent high-profile incidents highlight the risk of falling victim to price manipulation and outright fraud. In July, several members of popular e-sports team and influencer hub FaZe Clan were fired or suspended after amateur YouTube sleuths found evidence that the team members participated in a pump-and-dump scheme. The FaZe Clan members promoted a charity coin to their millions of social media followers before allegedly selling off their holdings shortly after its launch, causing the coin’s price to collapse. The incident exposed the ethically questionable practice of social media influencers hawking altcoins to their mostly young, financially inexperienced followers.

The victims of cryptocurrency fraud are not limited to U.S. teenagers responding to Instagram campaigns. South African authorities are prioritizing new crypto regulations after several large scams cost investors approximately $4 billion so far this year. In a particularly egregious incident, two brothers who founded the exchange platform Africrypt mysteriously disappeared after notifying investors that $3.6 billion had been lost from client accounts.

The aforementioned examples underscore the necessity of common sense precautions when it comes to crypto markets. As with traditional financial system frauds, if a promised rate of return seems too good to be true, it probably is. Crypto experts recommend checking a coin’s website for a public white paper that has detailed information on its purpose and structure prior to an initial coin offering (ICO). If a coin website does not feature a clearly written public document of this kind, it may be an indication of a poor business plan or at worst, fraudulent intentions. Anonymous founders or a lack of transparency about a currency or exchange’s liquidity may also be red flags.

Potential investors and due diligence providers should educate themselves on the particular risks of the crypto space as well. Investigators might consider paying special attention to cryptocurrency exchanges, coins, and digital asset services companies in a subject’s background. Involvement in cryptocurrency markets is not a red flag in and of itself, but merits additional scrutiny to detect reputational risks such as consumer complaints or currency collapses under suspicious circumstances. On the technical solutions side, an ecosystem is emerging of companies that offer blockchain KYC services as well as AML, asset tracing, and investigative tools focused on cryptocurrency crime and fraud investigations. With Bitcoin reaching $1 trillion in market capitalization this year and blockchain-based currencies, trading platforms, and services catching fire with consumers and investors, cryptocurrency fraud is set to join traditional money laundering and FCPA violations as a top item of concern for regulators, financial institutions, and due diligence professionals alike.

Jon Ettinger is a Senior Associate at Vcheck Global

A slow-moving wave caused by the buzz generated over The International Consortium of Investigative Journalists’ (ICIJ) publication of 11.9 million leaked documents on October 3, dubbed the Pandora Papers, may soon wash over regulatory environments. Notable amongst this treasure trove of information was the revelation of South Dakota’s role as a tax haven and the efficacy of U.S. sanctions imposed on Russian oligarchs.

The Pandora Papers were preceded by two similarly impactful data leaks,The Paradise Papers of 2017 and The Panama Papers of 2016. Both unveiled the widespread use of offshore companies by heads of state, the rich and famous, and criminal enterprises for various purposes, both harmless (privacy and tax mitigation) and nefarious (hiding assets from authorities and creditors, tax avoidance and money laundering). This trifecta of data leaks underscores the vital role played by investigative due diligence firms in helping decision makers understand who they are doing business with, including their sources of wealth.

The complexity and global nature of the offshore financial system necessitates partnering with a provider of investigative due diligence who is properly equipped to conduct efficient yet thorough cross jurisdictional investigations while adhering to location specific privacy regulations. Sought after skills include multi-lingual analysts holding internationally recognized investigative certifications including Certified Anti-Money Laundering Specialist (CAMS) and Certified Fraud Examiner (CFE), coupled with academic backgrounds in international affairs, law, and economics.

Skilled researchers can legally obtain intentionally concealed information including business affiliations and sources of wealth by leveraging their specialized skill sets in tandem with transparency focused record sources including the ICIJ Offshore Leaks Database and OpenCorporates’ company data. The ICIJ Database plays a foundational role in public records due diligence. While findings may not be adverse in themselves, they can reveal connections to offshore entities. These affiliations can then be raised by clients in conversations with business partners from an awareness standpoint.

Notable among the Pandora Papers data are two U.S.-centric findings. The revelation of South Dakota as a global tax haven left casual news consumers scratching their heads since mention of the offshore financial system conjures images of Caribbean beaches, Swiss slopes, and Delaware office parks. The Bahamas by the Black Hills is the product of low taxes, state laws which are extremely favorable to trusts, and the U.S.’ reluctance to adhere to the Common Reporting Standard (CRS) which commits signatories to sharing information regarding foreign-held assets.

Interestingly, in spite of domestic offshore centers including the grizzled veteran Delaware and fresh-faced newcomer South Dakota, the wealthiest Americans, including Warren Buffett, Jeff Bezos, Bill Gates, and Elon Musk, are not named in the Pandora Papers. Two explanations for this have been offered by financial experts. The first is that the U.S.’ comparatively low tax rates compared to other countries diminishes the motivation of the country’s financial elite to utilize tax havens. The second and more plausible explanation is that America’s super rich are utilizing offshore jurisdictions and companies not included in the Pandora Papers.

One positive finding amidst the global outrage-inducing details of the Pandora Papers is the success of U.S. sanctions aimed at Russian oligarchs. Especially interesting is that aside from hampering the activities of their intended Russian targets, the sanctions “trigger[ed] losses that spread across their interconnected financial networks.” For both consumers and practitioners of investigative due diligence, this finding underscores the foundational role of sanctions and politically exposed persons (PEP) screening.

In addition to giving credence to U.S sanctions, the legislative boost effect of the Pandora Papers’ publication includes renewed attention to Congress’ passage of the Corporate Transparency Act (the CTA) in January. This legislation requires U.S. businesses to file “beneficial ownership” information with the Financial Crimes Enforcement Network (FinCEN).” Prior to the CTA’s passing, U.S. anti-money laundering laws were dormant for nearly two decades.

Looking abroad, the widespread attention garnered by the Pandora Papers is expected to spark additional reforms with the intention of increasing transparency to support the global fight against corruption and money laundering. This includes increased momentum behind calls by organizations such as Transparency International for a global standard on corporate transparency, notably for each country to maintain a public central register of company owners. Such changes will be a boon for both providers and consumers of investigative due diligence by increasing transparency which in turn reduces the time spent per engagement.

The information revealed by the Pandora Papers emphasizes the necessity of truly knowing who one is doing business with beyond carefully cultivated public images and intentionally obscured corporate records. Obtaining actionable information is made possible through high quality investigative due diligence conducted by reputable investigative firms. This equips their clients with the necessary questions to ask potential business partners to alleviate current and future relationship concerns. Connect with Vcheck Global to infuse your company’s critical decision making with an informational competitive edge.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

The centrality of cultural consciousness within due diligence investigation lies in the reality that hard skills such as research must be paired with effective soft skills such as cultural awareness to ensure a best-in-class investigation.

For example, when initiating a project in North Africa, one must be aware of holidays such as Ramadan which can severely impact the ability to obtain records from government offices or schedule discreet source inquiries. Likewise Christmas and Holy Week business closures in Latin America are significantly lengthier and more widely observed than in the United States. Relatedly, regional events such as Carnaval in Brazil have major local scheduling impacts despite not being well known abroad. Additionally, consideration of time zone differences in tandem with knowledge of the local work week is imperative. For instance, when scheduling a call with a source in Israel, Friday evenings should be avoided, however, Sunday will suffice if quick turn around is required.

When communicating across borders, cultural awareness is imperative. This ranges from knowledge of local honorary titles such as the use of Shri in place of Mr. in various Southeast Asian countries to never addressing elders by their first names in places such as Pakistan. In addition to consideration of honorifics, an understanding of local naming conventions is important. Examples include the use of bin (son of) and bint (daughter of) in Arabic or the family name preceding the individual name in China. Failure to consider the aforementioned linguistic characteristics can result in the misidentification of subjects among other identification errors.

Finally, an understanding of local customs is vital, whether conducting an investigation in person or from afar by telephone or video conferencing. Aside from cultivating a respectful environment, displaying an understanding of local cultural norms enhances the comfort level of a conversational partner and can prove crucial to obtaining information.Considerations include:

Prior to initiating an interaction, confirm greeting conventions.
Is a handshake with a member of another sex accepted or is direct eye contact expected or considered a sign of disrespect?
Demonstrate an awareness of local modesty norms when selecting an outfit to be worn for an in-person or video interaction.

If you have a need for an international due diligence investigation, take advantage of Vcheck Global’s research team which leverages extensive in-house foreign language capabilities, overseas experience, and regional academic focus. The team’s ability to seamlessly integrate hard and soft skills ensures your investigation extends beyond traditional diligence sources through the inclusion of extensive area knowledge.

Leading providers of international due diligence investigations such as Vcheck Global benefit from having talented and diverse research teams. When onboarding an early career analyst, an expansive investigative skill set must be imparted, maintained, and continually refreshed to keep pace with the ever changing nature of the diligence industry. While skills such as database research and open source analysis can be learned, one critical professional component, cultural consciousness, is acquired through a combination of experience, empathy and curiosity.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

As online court records, news articles, and other sources often only extend back to the early-to-mid 2000s, litigation, regulatory actions, and other adverse incidents prior to this time may escape detection by standard research, leaving investors in the dark regarding potential monetary and reputational damages. For example, even in a high-information jurisdiction such as the United States, documents from federal court cases prior to 2000 are rarely available. However, using proprietary technology, advanced research techniques, and expert intuition, Vcheck Global’s skilled investigators can uncover serious issues that industry standard public records research may miss.

Recently, Vcheck Global was contacted to investigate a high-profile subject residing in a European jurisdiction known for its opaque judicial and regulatory records. Preliminary searches of this country’s legal and regulatory records—along with red-flag media searches in English and the country’s official language—revealed little adverse information regarding the subject. However, when delving into the subject’s professional history, the investigator noticed a paucity of information prior to 2000, when the subject established their current professional affiliation. Using a proprietary database that grants access to archived copies of new articles published as early as the 1980s, the investigator identified two holding companies through which the subject pursued investment activities throughout the 1980s and 1990s. Armed with the names of these companies, further research revealed that not only had each entered bankruptcy proceedings, but that each proceeding had direct legal consequences for the subject, including asset freezes, a prison sentence, and more.

After the first of the subject’s holding companies filed for bankruptcy in the early 1990s, citing debts of nearly $100 million, media reported that the company was under investigation for false accounting and reporting. Specifically, the holding company was alleged to have sold its shares in a prominent European bank—dubbed by media as the prize asset of the subject’s family’s holdings—to a low-profile company owned by the subject’s father at a below-market price. This transaction, which occurred in the weeks prior to the bankruptcy, was later labeled an “illicit attempt to shield the shares from creditors” by a court that ordered the shares seized. As a result of these allegations, the subject, along with their holding company’s other executives, was arrested. The subject later negotiated a 23-month prison sentence.

Additionally, using the name of the subject’s second holding company, the researcher identified ongoing litigation in six outside jurisdictions related to a $3.1 million judgment that the subject had been issued in one of the six jurisdictions. Court documents revealed that the judgment stemmed from outstanding promissory notes that the subject’s second holding company had solicited from a European bank in the year prior to its $150 million bankruptcy. In 2002, the bank successfully secured the judgment to recover the outstanding debt on the promissory notes, which the subject had personally guaranteed. When the bank was unsuccessful in their repeated attempts to extract the full judgment, they filed suit against the subject in six jurisdictions. In one such jurisdiction, the bank successfully obtained an order freezing the subject’s assets at four banks.

This report highlights the challenges posed by subjects with lengthy business histories as well as the professional advantage offered by Vcheck Global’s highly skilled investigators, who are able to illuminate the darkest corners of a subject’s background. While standard public records research would have yielded a modest report with minimal coverage of the subject’s activities prior to the 2000s, Vcheck Global’s investigators unraveled a complex web of bankruptcies, arrests, asset freezes, and other valuable information that would have otherwise gone unnoticed. For more information on how Vcheck Global can assist you in your next transaction, please contact us.

Jake Malenka is an Associate for Vcheck Intelligence.

Suggestions for safely streamlining your business operations

What do General Electric, Marriott, and Instagram have in common? Each of these industry leaders were impacted by data breaches involving third parties in 2020.

In addition to the reputational damage to each company, these incidents exposed the personally identifiable information (PII) of customers (Marriott), employees (General Electric), and users (Instagram). Security Magazine reported in May 2021 that more than half of all organizations have been harmed by data breaches involving a third party. While high profile third party technological intrusions are highly concerning, several additional pain points of third party collaboration warrant equal concern.

Evaluating a potential partner’s reputation is challenging enough when they are located in the same country and crossing borders further complicates the task. As convenient as sites such as Google Reviews are, their information can be easily manipulated by nefarious actors, including the reviewees themselves. In addition to verifying that a company is properly registered and not subject to regulatory action, an experienced due diligence provider can utilize local contacts to provide a comprehensive understanding of a subject entity.

A trusted local partner can:

Verify an entity’s addresses. (Is a virtual address being used?)
Check for indicators of concern (Are employees present? Is the site in disrepair? Any allegations of corruption?)
Verify claims made in marketing materials (Is child labor being utilized?)
Confirm a name (Were any prior names used? Are trade names used?)

Confidence in a potential business partner can be enhanced through the use of discreet source inquiries. Carefully considered conversations with local industry leaders and trade organizations can substantiate or contest positive media coverage and polished marketing materials.

When vetting a prospective partner, find out which systems and employees will have access to your company’s and clients’ sensitive information. A third party vendor may have elaborate physical and informational security, however, the best laid plans can be thwarted by a compromised employee. Incorporating due diligence investigations into the onboarding of key employees coupled with regular refresh checks serves as a powerful deterrent to insider threats.

Convenience, expanded capability, and reduced costs make the use of third party vendors a highly attractive option for companies across a wide range of industries. Prioritizing caution ahead of convenience when exploring a partnership with a third party vendor demonstrates a company’s commitment to its values, employees, and clients. Furthermore, carefully considered vendor vetting protects a firm’s reputation and profitability against irreparable damage. Before engaging a third party vendor, consult with Vcheck Global’s investigative professionals to set the stage for a successful partnership.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

Putting adverse findings into perspective.

Bankruptcy, litigation, and negative press—each of these subjects trigger alarm bells when they appear in a due diligence report. Accordingly, it is important for readers to consider several points when reviewing potentially adverse findings.

A helpful starting point for evaluating red flags is to remind oneself of the personal or company goal behind the investigation. Is a potential business partner being evaluated, an executive being considered for promotion, or an acquisition being planned? In each of these situations, a holistic approach to potentially adverse findings serves to calibrate concerns inline with a client’s specific focus.

A widespread area of concern for diligence clients is litigation. When reviewing legal matters, note the subject’s role. An individual identified as a plaintiff is often viewed differently in terms of potential risk than a subject who was a defendant. Next, check the case type. Is it a personal injury matter stemming from a minor car accident or an accusation of securities fraud? Relatedly, it is helpful to note a subject’s profession when considering their involvement in litigation. Notably, it is not uncommon for board members of publicly traded companies to appear in extensive civil litigation such as shareholder suits stemming from opposition to an entity’s sale or a disagreement over stock prices. In such an instance, note if there are specific allegations against the subject or if their inclusion as a party is based solely on their board role.

Financial troubles including bankruptcy and liens typically raise a reader’s eyebrows, especially in relation to a potential business partner. A property lien originating from a divorce and a judgement lien stemming from a criminal matter will likely have differing impacts on the evaluation of a subject’s suitability for a senior leadership role. Likewise, if a subject has been involved in a company bankruptcy, consider the larger picture. Was this individual directly involved as an owner or through holding a senior fiscal position or was their affiliation indirect such as having served as the chief marketing officer or head of human resources?

Negative press coverage can instantly impact the reputation of an individual or organization. Whether an investigation has revealed a single article or decades of media scrutiny, the source of adverse coverage should be noted. Does all of the coverage stem from a single publication? What is the nature of the publication? Is it an established news agency or a tweet from a recently created account with only a handful of followers? Does the originator of the information have a specific orientation such as an advocacy group or partisan publication?

An experienced due diligence provider such as Vcheck Global leverages a combination of extensive industry experience and innovative research tools to tailor findings to a client’s specific needs. Whether you are considering engaging a diligence firm for the first time or are seeking to enhance your company’s competitive intelligence capabilities, partnering with Vcheck Global’s seasoned team will help achieve your diligence goals.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

A lasting effect of the COVID-19 pandemic on the investigative due diligence industry is the spotlight on environmental, social, and governance (ESG) considerations. Notably, ESG issues have quickly transformed from a talking point to an action item. Major ESG events since March 2020 include global wildfires, a rapid shift to remote work, and numerous corruption scandals related to the supply of PPE.

The topic of ESG is wide ranging and highly subjective. According to an article published in Wealth Professional, “since not all data providers have the same [ESG] methodology, it can be difficult for investors to evaluate all their options.” Consider the following suggestions when incorporating ESG considerations into your company’s investigative capabilities, which are applicable to consumers as well as providers.

Know Your Client

A sound understanding of a client’s investigative goals is imperative for incorporating relevant ESG considerations into their reports. A client seeking pre-transactional due diligence in the renewable energy sector will value investigative insights focused on environmental considerations while a client vetting a c-suite appointment will benefit from a focus on corporate governance. Incorporating client specific information demonstrates a client-first approach which can make the difference between a one-time engagement and a lasting partnership.

Location Matters

An investigative partner with global coverage and in-house linguistic and regional expertise can identify pertinent ESG issues that have escaped English language coverage while highlighting emerging areas of concern. Notably, discreet source inquiries can provide clients with a competitive edge for critical decision making. Conversations with strategically selected individuals can provide context to industry transforming regulations under consideration or offer context to social issues driving consumer behavior. Dive even deeper by incorporating site visits which can reveal concerns obscured by distance or a skilled marketing team. ESG concerns vary by region and country making international expertise an invaluable tool for businesses with an international presence to identify pertinent issues across the ESG spectrum.

Stay on Trend

New ESG concerns can emerge instantly following events ranging from a breaking news tweet to an unexpected industrial accident. Keeping pace with headlines and fluid adverse risk sources, including sanctions and watch lists, requires technological expertise. Utilize AI social media reporting as well as automated risk screening and ongoing monitoring to remain current with the issues most vital to your organization. ESG buzzwords change frequently; this should be reflected by a diligence provider’s monitoring capabilities, both automated and human.

Embrace Change

A universal solution for ESG monitoring does not exist. New technologies must be vetted. The regulatory environment is constantly evolving. These are just a few of the reasons why providers of investigative due diligence must be willing to pivot with a myriad of externalities. Make informed decisions supported by investigative reporting incorporating ESG considerations tailored to your company’s informational needs while accounting for the unique footprint of every subject.

Ready to learn more about incorporating ESG concerns into your investigative goals? Contact Vcheck Global to kick-off an investigative due diligence program or to enhance existing investigative capabilities.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

Following a year of record-breaking growth, Vcheck Global continues to rank among fastest-growing private companies in the U.S. as compiled for Inc. Magazine’s annual Inc. 5000 list.

“We are distinctly proud to be named this year as one of the fastest-growing private companies in the U.S. The honor is especially meaningful after a year that challenged the growth and health of millions of businesses worldwide,” said Vcheck Global CEO Julie Peck. “At Vcheck Global, we made a decision at the beginning of an unknown period of challenge to our markets, our communities and our public health around the globe that we would remain steadfastly focused on our mission and delivering for our clients, no matter the challenging circumstances. The Vcheck Global team pulled together, kept their eyes on our purpose, and took care of each other and our clients. As a result, we emerged from an unprecedented global crisis as a stronger company, a better company, and a faster-growing company than before the pandemic arrived. This is what makes Vcheck Global a leader in our space—come rain or shine.”

Read the full press release here.

Navigating a job search is challenging, especially in a niche field such as investigative due diligence. Adding in emotions including shock and anxiety can make a job search feel insurmountable. Having recently concluded a search for a new diligence role following an unexpected layoff, I would like to pay forward all of the support provided to me and share several insights with the investigative community.

• Utilize your extended network: When my mother-in-law provided me with a list of friends and relatives to contact, I was perplexed since none of the individuals worked in investigative due diligence and most had never heard of the field. However, you never know the power of a stranger’s network; an email to a distant relative led to an introduction through a connection of a connection which led to a series of industry interviews culminating in an offer.

• Reach out to your former colleagues: There is no time like job search time to add former colleagues and professional contacts to your network. Following up on a conversation I made while checking into a conference several years ago resulted in a new friendship and intro to a hiring manager. Give your spouse/partner a heads up so they are not alarmed when you disappear to take off-hour calls.

• Read industry articles: If a piece piques your interest, reach out to the author. One advantage to working in a fairly small industry is the increased chance of connecting with thought leaders. Notably, most individuals authoring articles are well established in the field and have extensive professional networks. Reaching out to authors expanded my professional network and broadened my search horizons by exposing me to new firms and diligence adjacent roles.

• Turn to the professionals: Diligence focused job placement agencies exist and can be a great foot-in-the-door, especially for early career investigators who may have a limited professional network.

• Get certified: An industry specific certification such as CFE or CAMS stands out on a resume. Additionally, membership communities are helpful for networking, mentorship, and job postings.

• Stay confident: No one knows your capabilities better than you. Critically evaluate all offers with the goal of continuing your professional growth. Confer with colleagues and mentors in the field to ensure you are making a strategic move, rather than one of convenience.

• Follow-up: While your job searches can be all consuming, remember that most of your network is busy balancing their professional and personal lives. Accordingly, a well timed follow-up can be helpful. Most importantly, make sure to update everyone who aided your search after you have accepted a new role.

My search concluded when I accepted an innovative role with Vcheck Global, a position that did not even exist when I kicked-off my job search. It is very exciting to be part of a rapidly growing industry leader, in a role which leverages my prior diligence and industry-adjacent experience. I encourage anyone looking for their next diligence role to check out Vcheck Global’s openings and to message myself and my talented colleagues on LinkedIn. Good luck!

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

A recent survey of anti-fraud professionals revealed a widespread concern that corporate fraud will increase at their organizations over the next 12 months, aligning with further digitalization of consumers and supplier interactions and the growing shift to remote work in the wake of the pandemic. Now more than ever, businesses should implement risk management strategies and seek expert support to prevent fraud wherever possible.

According to the survey, conducted by the Association of Certified Fraud Examiners in partnership with professional services firm Grant Thornton, 51% of participating anti-fraud professionals reported the rate of fraud at their organizations being more than usual since the onset of the pandemic, and 71% of the respondent anti-fraud professionals stated they are expecting fraud to rise even further. Changing consumer behavior and business operations in a direction toward virtual experiences, such as online transactions, are two factors survey respondents said weighed significantly or moderately on the influence of increased fraud risk.

Fraud associated with federal funds granted during the pandemic to struggling businesses appears to be on the verge of rampancy. As of March 2021, the U.S. Department of Justice (DOJ) publicly charged 474 defendants with crimes associated with fraud schemes connected to the pandemic for attempting to obtain over $569 million from the government illegally. In a stern comment published by the DOJ, acting Assistant Attorney General Nicholas L. McQuaid said, “To anyone thinking of using the global pandemic as an opportunity to scam and steal from hardworking Americans, my advice is simple – don’t. No matter where you are or who you are, we will find you and prosecute you to the fullest extent of the law.”

The healthcare industry was hit particularly hard during the pandemic due to often necessary and urgent changes in third-party vendors and suppliers for physician offices, medical centers, and hospitals across the U.S., creating vulnerabilities that exposed many businesses to hidden risks including fraud. The DOJ has recovered billions of dollars from healthcare fraud lawsuits since 2017, as noted in our recent article. Without a fraud management strategy in place, fraud can grow like a virus—destructive to the health of businesses and exposing them to mounting losses.

One type of corporate fraud that is quickly becoming one of the most widespread crimes around the globe is procurement fraud. Procurement fraud is a complex form of fraud that often flies under the radar, as noted in our recent article. According to the article, “Manual methods of detection alone are ineffective at solving the problem, often unveiling just a fraction of cases only when it’s too late. To stay ahead of a severe problem, employers need automated risk screening and ongoing monitoring whenever possible.”

Fraudulent activity causes an estimated 5% of corporate gross revenue losses worldwide and, if left unchecked, fraud can permeate corporate cultures. Vcheck Global has helped its clients not only identify potential and inherent risks, but also helped clients establish successful programs that detect and prevent suspected fraud. Source inquiries, a service Vcheck Global has invested in significantly to support businesses in protecting their coffers and reputations, go beyond simple searches for risk and can help bring to light potentially shady dealings—including potential long-term implications for the business.

As investor focus rapidly shifts beyond established industries toward emerging industries worldwide, it is imperative that due diligence providers rapidly adapt their tradecraft to ensure that clients are able to invest with confidence. In addition to gaining a thorough understanding of various emerging industries in order to tailor investigations to new sectors, diligence providers must be able to clearly and efficiently explain investigative methodology to clients who are themselves often new to emerging industry investment. Diligence practices for two popular emerging industries, cannabis and cryptocurrency, are highlighted below.

Cannabis

As marijuana legalization continues to expand across the United States, investment in the industry continues to grow. Cannabis industry due diligence is unique in that certain findings typically deemed adverse in a traditional due diligence investigation may be seen in a positive light. In a standard due diligence investigation, identifying criminal records for a subject pertaining to the purchase and sale of marijuana would typically concern clients. However, such a rap sheet for the head of a commercial cannabis grow operation may be viewed by potential investors as positive additions to the subject’s work history which indicate a deep knowledge of both product and market.

Cannabis specific due diligence also requires geographic and cultural understanding. In the wake of Michigan’s legalization of recreational marijuana sales in 2019, investors eager to fund cultivation and dispensaries failed to consider the demographic makeup of their chosen retail operations. For example, The Arab American News reported in December 2020 that the Muslim Community of Hamtramck strongly opposed the emergence of the marijuana industry. With expansion of the cannabis industry ongoing in Michigan, investors and diligence providers should be conscious of the state’s large Muslim population.

As the cannabis industry expands, so do industry specific regulatory bodies. Comprehensive due diligence requires an understanding of the relevant government regulators. While traditional diligence clients are familiar with national industry regulators such as the SEC, cannabis regulation is frequently state specific and diligence providers must prioritize tracking the evolving regulatory landscape. In an interview with Shawn Hauser, partner and chair of the Hemp and Cannabinoids Practice Group at national marijuana law firm Vicente Sederberg, for Vcheck Global’s podcast RiskWatch, we discuss evolving legal frameworks, navigating regulatory compliance, and some of the core requirements for conducting due diligence.

Cryptocurrency

Cryptocurrency is riding a wave of popularity. Despite mainstream familiarity with the term and a general understanding that it refers to a digital asset, further knowledge of the industry is limited. The relatively new emergence of the cryptocurrency industry and a lack of government regulation add to the complexity of performing due diligence in this sector. When examining subject individuals and entities operating in the digital asset space, a combination of traditional and innovative investigative strategies can provide investors with peace of mind.

The time tested investigative practice of searching legal records and media serves to alert clients to any red flags involving a subject entity’s key players and related entities. For example, reviewing records maintained by financial regulators including the SEC and NFA can notify investors of problematic regulatory histories.

As an internet-based industry, due diligence in the cryptocurrency space provides an excellent opportunity to utilize artificial intelligence (AI) social media reporting. Technology such as that utilized by Vcheck Global’s investigators scans social media posts for derogatory content. Incorporating social media checks in a digital asset space investigation is recommended as popular social media platforms including Facebook and Instagram are hotspots for cryptocurrency scammers.

With the continued popularity of emerging industry investment, prioritizing pre-investment due diligence provides an excellent opportunity for investors to mitigate significant loss while gaining a deeper understanding of prospective business partners and new industries. Leading investigative firms such as Vcheck Global employ proven pre-investment due diligence techniques to provide clients with comprehensive knowledge in support of their respective business dealings. Before heading to the moon with cryptocurrency or cannabis investing, consider consulting with a trusted and innovative due diligence provider like Vcheck Global to ensure safe travels.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence.

Vcheck Global has been recognized for excellent services and rapid growth by The Silicon Review as one of the 30 Fastest Growing Private Companies to Watch in 2021.

“Globally there are many companies specializing in delivering enhanced due diligence services, but Vcheck Global stands out from the rest. Vcheck Global is a fast-growing, expert-driven company specializing in investigative techniques, from human-source, deep drive background investigations, to the technology-driven instant screening and monitoring necessary to protect our clients while they operate at the increasing speed of business. Vcheck Global is unique in their ability to address the spectrum of tools needed to manage entire third party portfolios.”

Read the full Q&A with Vcheck Global’s CEO Julie Peck here.

It wasn’t so long ago that Trevor Milton resigned his position as chairman of electric trucking company Nikola after an investment fund accused him of deceiving investors about the company’s technology. These assertions drove General Motors to take a $2 billion stake in Nikola before the company had produced a single truck.

This is just one example of the importance of prioritizing due diligence before an investment is made—an effort that can help investors potentially avoid millions of dollars in losses and getting embroiled in scandal. However, when an important deal is on the line, cursory due diligence conducted internally is often not enough to meet the thorough vetting requirements of an investor to mitigate risk. Such was the case of a recent Vcheck Global client seeking to invest in an European battery company.

The client requested Vcheck Global conduct deep-dive diligence on the company and its executives, and through this investigation Vcheck Global uncovered that the CEO of the company was embroiled in a bribery scandal during his previous employment with an Asian electric company. These findings came about as a result of verifying the battery company’s executives’ employment history in foreign jurisdictions, as well as combing public records and media sources in those foreign jurisdictions for unexpected information.

In presenting findings to the client, Vcheck Global’s due diligence report detailed how the CEO of the battery company was close to politicians where the company operated, but sources investigated by Vcheck Global could not draw a straight line between the CEO and allegations of corruption. The Vcheck Global report also noted that the sources reporting on the allegations stemmed from one NGO report, and that there was no corroborating reporting in other mainstream media outlets.

The findings from Vcheck Global’s due diligence ultimately helped the client make an informed decision based on what was gleaned and then corroborated by the client’s internal due diligence. If you or your business is considering foreign investment, Vcheck Global’s team has years of experience collaborating with internal due diligence teams to provide deep-dive diligence on subjects involved in the investment opportunities. Contact us to learn more.

Vcheck Global has been recognized among The Startup Weekly’s 2021 Business Products & Services Companies to Watch for its strong growth and excellence in 2020.

“Our future as a company keeps getting brighter, thanks to our continued focus on keeping our customers at the center of all that we do at Vcheck Global and the commitment of our talented and growing team,” said Julie Peck, CEO of Vcheck Global. “We continue to build on our culture of service and bring passion to the challenges that come with our rapid growth.”

Read the full press release here.

Vcheck Global has announced the appointment of two new executive leadership roles: Ki Lin Tay will take on the critical hybrid role of General Counsel & Chief People Officer, and Jason Tuthill joins the executive team as Chief Revenue Officer.

“These two appointments mark a critical milestone in Vcheck Global’s explosive growth and will bring experience, passion, and creativity to the challenge of continuing our high growth while building on the culture of collaboration, innovation, service, and connectedness that has made Vcheck Global a leader in the Enhanced Due Diligence and Background Investigations markets,” said Julie Peck, CEO of Vcheck Global. “I am thrilled to have both Jason and Ki Lin join our team as we expand our technology solutions and grow our service culture in an accelerating high-growth phase of the company.”

Tay is a seasoned attorney with extensive experience providing strategic advice and counsel to businesses across the United States and Canada. Tay practiced labor and employment law, and civil litigation in Toronto for several years before moving to California in 2016. In Los Angeles, Tay worked in-house at a disruptive SaaS technology company, creating an innovative way to provide human resources compliance services to businesses across the United States and helping the early-stage startup rapidly scale from 15 to almost 100 employees.

“To be competitive in the market starts within. It starts with your culture and the people representing your company,” Tay said. “When you are navigating complex compliance issues, mitigating legal risk, and managing a web of policies and procedures, it’s also important to be mindful of the impact on culture and on the organization as a whole. I’m glad to see that, early on, Julie is focused on the people and culture side of Vcheck Global, because that’s really what will propel the business forward. Building a brand and a culture that people want to be a part of—that’s what will give us a competitive edge, and that’s what’s exciting to me.”

Tuthill brings more than 20 years of executive leadership in both software and services businesses to Vcheck Global, including more than 11 years in leadership roles with IHS Markit. In his new role with Vcheck Global, Tuthill is responsible for leading and growing Vcheck Global’s best-in-class sales team and taking new services and technology products to a broad range of compliance clients.

“I look forward to working with Julie and the executive team to accelerate growth as we expand into new markets and diversify our revenue mix through the launch of new products like Vcheck RED, our new Third-Party Risk Management platform,” Tuthill said. “We are uniquely positioned to disrupt the due diligence background investigations market through a combination of best-in-class technology solutions and a consultative-based approach to supporting our customers.”

Vcheck Global continues on a growth trajectory, having been recognized as one of the top 100 fastest-growing companies in California according to the Inc. 5000 Regionals list revealed earlier this week.

Among the abundance of opportunity for potentially lucrative investments in the healthcare industry lie hidden risks that could cause monetary loss and reputational damage. As part of a recent due diligence investigation, Vcheck Global’s highly skilled investigators identified significant risks associated with a possible medical practice investment and put them into context for the client.

The client contacted Vcheck Global about a possible investment into a medical practice based in the U.S. Vcheck Global investigators discovered in public records that the medical practice had been fined several times by the U.S. Department of Justice for violations of laws regarding Medicare fraud and participation in kickback schemes.

These risks are more common than one might think. The Justice Department’s recoveries from lawsuits involving healthcare fraud have steadily increased over the past several years, indicating both the priority the federal government places on deterring such fraud as well as the potential growth in healthcare fraud. The department recovered $2.1 billion from healthcare fraud lawsuits in 2017, $2.5 billion in 2018, and more than $2.6 billion in 2019, according to federal data released in January 2020. On top of these recoveries of federal losses, the department has also recovered millions from fraud associated with state Medicaid programs.

Based on the discovery of Medicare fraud and kickback schemes associated with the potential investment opportunity, Vcheck Global undertook source inquiries upon consultation with the client to ascertain how this issue has impacted the reputation of the company and its partner. Human source intelligence involves conducting source inquiries within an industry to identify risks, convey their significance, and contextualize the potential long-term implications of those risks.

Upon utilizing Vcheck Global’s human-source intelligence investigative capabilities, Vcheck Global found that these issues led to a “questionable” industry reputation for the medical practice and that involvement in multiple of these schemes was a “pattern of behavior.” The final report Vcheck Global produced for the client was able to put what was found in public records into greater context of industry reputation and how the company and its founder were viewed by peers.

In this episode of Vcheck Global’s podcast, RiskWatch, Vcheck Global Directors Rahul Ravi and Alex Sorin speak with Mike Blankenship, a Partner in the Houston office of law firm Winston & Strawn, and an expert in corporate finance and securities law. The discussion covers why special purpose acquisition companies (SPACs) continue to gain investor attention and the role of investigative due diligence in mitigating potential risks on both the SPAC management team and the operational company.

Blankenship’s practice focuses on corporate finance, private equity, M&A, and securities law. He regularly works with public companies on capital markets offerings, strategic transactions, and general business and securities law topics. Blankenship represents both underwriters and issuers in U.S. and international capital markets deals, including initial public offerings (IPOs), and advises on regulation of corporate governance and securities markets.

The federal government recently expanded the Bank Secrecy Act to require firms that lack a federal functional regulator (FFR)—including private banks, trust companies, and non-federally insured credit unions, known as non-FFR institutions—to adhere to the same anti-money laundering (AML) regulations that apply to FDIC regulated institutions, including the creation and maintenance of AML and customer identification programs, as well as beneficial ownership requirements. The final rule took effect on November 16, giving these firms a limited window of 120 days to comply.

Before these new rules were approved, non-FFR institutions were simply required to make and maintain certain records, file reports for transactions of more than $10,000 in currency, and file suspicious activity reports. Trust companies, private banks, and credit unions also had to conduct formal customer identification procedures (CIP) for all clients, though other non-FFR institutions did not have to meet this CIP requirement.

Under the new rules, compliance teams must analyze the impacts of these new regulations on existing customer verification programs, as well as beneficial ownership requirements. They must ensure procedures for determining if a new customer appears on federal terrorism watch lists are correct. They must not only maintain a record of customer identifying information and descriptions of sources and methods, but prove that the record is maintained. They must also have adequate communication procedures for notifying clients in advance of identity verification data requests.

While planning and executing all of this, compliance teams also must get an AML program that meets the federal government’s minimum standards approved by the firm’s governing body. Each AML program is required to include the following “Five Pillars”:

internal controls systematically designed to enable ongoing compliance with the Bank Secrecy Act;
independent compliance testing conducted periodically by the firm or an outside party;
a qualified AML officer designated as responsible for coordinating and monitoring Bank Secrecy Act compliance on a day-to-day basis;
appropriate personnel training; and
an adequate risk-based method for conducting ongoing due diligence of customers, which includes, but is not limited to, continuous monitoring for suspicious transactions to be reported upon identification and maintaining up-to-date customer data regarding the beneficial ownership of legal entity customers on a risk basis.

For example, according to the new rules surrounding due diligence for private bank accounts opened by non-U.S. citizens, firms “must take reasonable steps to ascertain the identity of the nominal and beneficial owners of, and the source of funds deposited into, private banking accounts, as necessary to guard against money laundering and to report suspicious transactions.” Politically exposed persons (PEP) due diligence appears to be needed under these rules too, as the requirements state these firms “must also conduct enhanced scrutiny of private banking accounts requested or maintained for, or on behalf of, senior foreign political figures (which includes family members or close associates). Enhanced scrutiny must be reasonably designed to detect and report transactions that may involve the proceeds of foreign corruption.”

Where do these firms start? This multifaceted challenge requires governance, compliance, technology, and logistics. Vcheck Global’s experienced team of investigators have worked with hundreds of firms over the years to establish and strengthen due diligence programs for risk management and corporate compliance, including many in financial services. Our team closely follows the latest announcements and changes proposed and enacted by regulatory bodies, and brings that knowledge to every investigation we conduct for our clients.

It is our goal to establish trusted partnerships with our clients to provide the expert due diligence and background investigation services they need to stay compliant and mitigate risk. Contact us here to learn more.

Though it may appear that partnerships and M&A across the banking sector have been slowed by the pandemic, a reported uptick in deals closed in August may indicate increased M&A deals in financial services in the remainder of 2020 and across various industries. Moreover, while corporate banks have not been known for risk-taking, the growing demand from customers for seamless digital—and contactless—experiences and frictionless transactions is driving banks to partner with fintechs for quick, cost-effective deployment of new services. Before institutions move into a new partnership or pursue M&A in a still distressed economy, which may exacerbate the existing risks involved in such deals, they are considering a more comprehensive approach to due diligence.

The evidence of resurging M&A is in the recent news of Charles Schwab closing on a $22 billion purchase of rival broker TD Ameritrade, and Morgan Stanley’s acquisition of E-Trade for $13 billion—plus a surge of wealth management M&As reaching record levels in the third quarter of this year. According to the latest ECHELON Partners RIA M&A Deal Report, the third quarter of 2020 shows a record 55 transactions among investment advisory firms, beating last year’s high of 53 in Q4 2020. The record-breaking quarter of M&A occurred after only 35 deals happened in the second quarter, creating one of the highest increases between quarters in the industry’s history and highlighting a rebound toward normal deal-making activity.

Transactions in today’s market are not limited to distressed banks (or businesses) seeking additional capital or looking to combine with a stronger institution. From the Charles Schwabs and Morgan Stanelys of our economy using “dry powder” for expanding their market reach, to sell offs of product lines and service divisions or failed institutions being acquired from the Federal Deposit Insurance Corporation (FDIC), varying types of transactions all require some level of due diligence to investigate areas including the institutions’ customer base and potential, active, or settled litigation. Here are some of the reasons why due diligence is performed for M&A:

Confirmation and verification of data brought forth during a deal or in the investment process
Identification of potential flaws in the deal or possible investment to avoid a potentially harmful business transaction
Obtaining data useful for valuing the deal
Ensuring that the deal or possible investment meets criteria set forth for the investment or deal

As fintechs more frequently partner with financial institutions to deploy innovative solutions, regulatory considerations and proper vendor due diligence can help prevent potentially costly problems. The complexity of federal and state laws fintechs are still burgeoning, with new regulatory obstacles coming in the future. Fintech partnerships should start with verifying that the fintech is in good standing with regulators. From there, other considerations for the potential fintech partner may include:

Are they tracking and following existing regulations, and what measures will they take to update procedures as regulations evolve?
Which rules apply to their existing products and services?
Do they have any required licenses or certifications to operate?

Managing compliance in partnerships and M&A goes both ways, and Vcheck Global’s team has worked on both sides of various financial services deals to investigate vendor relationships and support M&A. Vcheck Global actively observes the latest actions taken by regulatory bodies as well as the depth of experience in performing due diligence for these types of deals.

Source:
https://www.forbes.com/sites/markbruno/2020/10/08/wealth-management-ma-activity-surges-to-record-levels/

Just one month before the International Consortium of Investigative Journalists began reporting on what has been dubbed the “FinCEN Files”—an investigation of thousands of suspicious activity reports and government documents highlighting global financial corruption—Financial Crimes Enforcement Network (FinCEN) dropped an important guidance document on August 3 that highlights the serious, ongoing national security and criminal threats posed by politically exposed persons (PEP) who engage in illicit activity as a top priority for U.S. regulators. The guidance document was followed by a joint statement from U.S. financial regulatory bodies on August 21 further highlighting the need for compliance with customer due diligence (CDD) with a focus on identifying and monitoring high-risk PEP customers.

The two guiding documents released in August both highlight the need for proper CDD and further exploration of concerns with PEPs. The new guidance issued by FinCEN on August 3 furthers the existing CDD regulations requiring financial institutions to verify the identities of potential account holders who own or run a business, keeping a watchful eye on PEPs. According to FinCEN, a PEP “is a term commonly used in the financial industry that refers to a foreign individual entrusted with prominent public functions” and often includes close associates and family members.

In a given year, between 2 and 5 percent of global GDP is laundered globally. That equates to about $800 billion to $2 trillion U.S. dollars, according to Deloitte, and while the gap between the two numbers is vast the lower estimate should be eye-widening to the seriousness of the issue that financial institutions and regulators must address. Under FinCEN’s existing anti-money laundering (AML) rules for banks, Section 1020.210, regulated financial institutions’ AML programs must—in addition to maintaining internal controls independently tested for compliance and overseen by designated individuals—include “appropriate risk-based procedures for conducting ongoing customer due diligence, to include, but not be limited to: (i) Understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile; and (ii) Conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.”

The August 3 guidance takes this rule a step further, clarifying that in order for a financial institution to develop a customer risk profile, the firm needs an understanding of the financial crime risks of its customers such as association with money laundering or terrorist financing—distinguishing various risks of bank customers and actively updating risk profiles. According to the guidance document, “Should the financial institution become aware as a result of its ongoing monitoring of a change in customer information (including beneficial ownership information) that is relevant to assessing the risk posed by the customer, the financial institution must update the customer information accordingly.”

A few weeks later, on August 21 FinCEN released the Joint Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency. According to the joint statement, “In high-profile cases over the years, foreign individuals who may be considered PEPs have used banks as conduits for their illegal activities, including corruption, bribery, money laundering, and related crimes. Banks are reminded of their obligation to identify and report suspicious activity, including transactions that may involve the proceeds of corruption. The Agencies recognize that PEP relationships present varying levels of money laundering risk, and those risks depend on the presence or absence of numerous factors.”

While not all PEPs are higher risk customers, banks must employ appropriate risk-based policies for performing CDD to understand the purpose and nature of customer relationships for compiling a customer risk profile, and perform ongoing monitoring that allows for the identification and reporting of suspicious activity that should be noted in the customer’s risk profile. There are various factors government regulators suggest considering when developing customer risk profiles, including:

Position of public office or public trust held by the customer (or that of their family or close associates)
Indications that the customer may misuse the authority granted via public office or trust for personal gain
Types of products and services used by the customer
Nature and volume of transactions made by the customer
Geographical locations associated with the customer’s authority and/or activity
Designated governmental responsibilities to the customer
Nature and level of authority the customer has over governmental activities or officials
Access the customer possesses to government assets or funding

For years, Vcheck Global has been a trusted partner assisting banks and financial services firms with conducting comprehensive due diligence of their customers, with a focus on identifying PEPs and other potential risks, to ensure they can effectively root out potential risks and mitigate hefty fines and negative brand exposure.

Sources:

https://www.icij.org/investigations/fincen-files/global-banks-defy-u-s-crackdowns-by-serving-oligarchs-criminals-and-terrorists/

https://www.fincen.gov/sites/default/files/2020-08/FinCEN%20Guidance%20CDD%20508%20FINAL_2.pdf

https://www.law.cornell.edu/cfr/text/31/1020.210

https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200821a1.pdf

https://www2.deloitte.com/content/dam/Deloitte/in/Documents/finance/Forensic/in-forensic-AML-Survey-report-2020-noexp.pdf

A wave of enforcement actions from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) over the past two years has likely pushed the release of a new sanctions compliance framework—the first ever by the office—and highlights the critical importance of supply chain due diligence to mitigate sanctions risk.

Quite often, OFAC violations occur unwittingly—and in the eyes of regulators ignorance is not a valid excuse. OFAC’s new sanctions compliance framework focuses on how a robust and adhered-to sanctions compliance program (SCP), including clearly defined protocols for risk assessment and proper due diligence, can help companies avoid common causes of sanctions violations. The framework offers guidance to help companies assess and update their SCPs as needed. Acknowledging company SCPs will vary based on unique risk factors—such as company size and complexity, products and services, customers and partners, and geographic locations—the new framework outlines central elements of effective SCPs that apply to all. They include:

Senior Management Commitment – Noted as one of the most important factors for a successful risk-based SCP, senior management support looks like adequate resources allocated for compliance—including designating a senior compliance team member to be the organization’s dedicated OFAC compliance officer—and support for a “culture of compliance” across the organization.
Risk Assessment – A key tenet of a successful SCP involves routine and, if appropriate, ongoing assessment of risk to identify OFAC issues that the organization is likely to encounter.
Internal Controls – An effective SCP has defined policies and procedures for identifying, escalating, reporting (when appropriate) and keeping records of OFAC-prohibited activity.
Testing and Auditing – An independent, comprehensive, and objective testing and/or audit function is needed to assist with recalibrating, enhancing, or updating SCPs as risk assessment needs or sanctions environments change.
Training – Adequate training reinforces the support of the SCP beyond senior management, ensuring OFAC compliance among employees and stakeholders such as customers, business partners, suppliers, and counterparties.

Once senior management buys into the importance of an effective SCP, companies often seek expertise in the marketplace, such as that of Vcheck Global’s industry professionals, to either augment or act as their compliance team and assist with OFAC compliance via risk assessments such as background investigations and due diligence.

The OFAC framework highlights three areas of focus for companies to consider for routine risk assessments: 1) customers, counter-parties, intermediaries, and supply chain; 2) services and products offered, and how and when they fit into other commercial or financial systems, networks, services, and products; and 3) the geographic locations of the business’ operations, customers, counter-parties, intermediaries, and supply chain.

More than guidelines for creating an effective SCP, the framework provides specific examples of identified weaknesses and deficiencies with SCPs that could put companies at risk. Here are three of the several cited examples to consider:

“Misinterpreting or Failing to Understanding the Applicability of OFAC Regulations”

OFAC regulations target foreign regimes, traffickers, terrorists, weapons dealers, and other threats, enforcing trade and economic sanctions based on U.S. national security goals and foreign policy regulations. The U.S. updates sanctions designations and issues new sanctions through OFAC, and often. In order to adhere to the latest regulations, Vcheck Global monitors these regulations and helps its clients complete the necessary supply chain due diligence to avoid unnecessary risk and prevent financial loss. For example, in May, the Treasury along with the U.S. State Department and U.S. Coast Guard issued a global advisory regarding deceptive shipping procedures designed to evade sanctions, specifically those issued for Iran, North Korea, and Syria. The advisory includes best practices for private industry to consider for mitigating risk exposure to sanctions.

“Exporting or Re-exporting U.S.-origin Goods, Technology, or Services to OFAC-Sanctioned Persons or Countries”

More well-reported U.S. sanctions on countries including Russia, North Korea, Iran, Cuba, Syria, and Venezuela, however there are also lesser-known sanctions against Burma, Somalia, Nicaragua, Sudan, and Darfur. Beyond country-designated sanctions, the U.S. also has cyber-related sanctions to protect critical infrastructure, prevent denial of service attacks, and potential loss of sensitive information at scale including personal finance data and trade secrets. Vcheck Global’s team of investigators are consistently monitoring OFAC regulations for changes and updates, and are adept at poring through sanctions and watch lists to identify subjects and affiliations.

One egregious OFAC case involving a Connecticut-based shipping company was identified to have engaged in business with a Burmese trading business actively listed on OFAC’s list of individuals and companies affiliated with targeted countries. The transactional value of the shipping company’s 36 identified OFAC violations amounted to more than $1.7 million. The potential civil liability was settled by the shipping company for $1.125 million—a settlement that may have been avoided had the shipping company completed and followed findings from a proper supply chain due diligence investigation.

Improper Due Diligence on Customers/Clients (Ownership, Business Dealings, etc.)

As stated at the beginning, non-compliance with OFAC regulations never pays off. Ignoring important due diligence tasks or assigning them to untrained team members who lack the ability or motivation to thoroughly investigate a business relationship or activity can lead to hefty fines and a tarnished business reputation.

Sources:

https://home.treasury.gov/system/files/126/framework_ofac_cc.pdf

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20200127

https://home.treasury.gov/system/files/126/05142020_global_advisory_v1.pdf

Sweeping reforms to the Bank Secrecy Act—the likes not seen since the 2001 Patriot Act—have been passed by the U.S. House of Representatives in the pending National Defense Authorization Act for 2021 (NDAA), setting the stage for the formation of a national, non-public registry of beneficial owners of corporate entities and corresponding information necessary for the U.S. Department of Justice (DOJ) to legally pursue the individuals behind shell companies used for money laundering and other illicit activity. Vcheck Global is paying close attention to how this potentially foundational change to U.S. anti-money laundering (AML) regulations could increase financial transparency in beneficial ownership, and the potential impacts for risk mitigation and corporate reputation protection.

Criminals and hostile state actors often use shell companies to obscure ownership interests from public scrutiny. The DOJ has means to prosecute identified money launderers, however the absence of a beneficial ownership register further obfuscates hostile actors’ activity. Under current U.S. law, financial institutions are required to investigate third parties and vendors as part of risk management, which includes requesting customers to provide critical information about beneficial ownership of legal entities. This creates a burden on financial institutions’ regulatory and compliance teams, which are often spread thin navigating and complying with complex regulatory frameworks such as those established under the Wall Street Reform Act of 2008. These compliance departments often seek outside assistance from firms like Vcheck Global, tapping experienced investigative teams to traverse regulations, uncover risk, and help preserve corporate integrity.

Since taking effect two years ago, Vcheck Global has helped banks, brokers, and other entities comply with the U.S. Treasury Department’s Financial Crimes Enforcement Network’s (FinCEN) Customer Due Diligence (CDD) Rule, which mandates identification and verification of corporate beneficial owners that open accounts, as well as documentation of AML procedures for understanding the nature of the accounts and monitoring them for suspicious activity over time. Vcheck Global’s recently launched Diligence Refresh Program aligns with this regulatory mandate, providing clients with the peace of mind over the course of the account’s activity without the cost of ad hoc subject investigations. While the CDD rule is considered by regulators and industry advocates as important to fostering financial transparency and opposing illicit financial flows, the proposed regulations in the 2021 NDAA would supercede the CDD and potentially reduce the burden on banks and other financial services companies to individually collect highly sensitive customer information and verify its completion and accuracy at scale.

Various groups from the FBI to the U.S. Chamber of Commerce, American Bankers Association and other financial trade organizations advocated for increased financial transparency with beneficial ownership, which led to incorporating the new AML provisions into the pending 2021 NDAA. The House voted on July 20—just one day before the final vote on the bill—to incorporate them. The House pushed forward the pending 2021 NDAA on July 21, which is now up for review and amendments in the U.S. Senate. The provisions now ensconced in the bill would order FinCEN to create and maintain the proposed registry of beneficial ownership data, as well as modernize certain AML regulations and Treasury authorities. If passed into law, legal entities anywhere in the U.S. would likely be required to submit their beneficial owners’ personal information to FinCEN on a regular basis for law enforcement to use for better tracking of illicit fund flows through shell companies, or face penalties. Vcheck Global’s investigators, who are highly trained in safely navigating through complex government databases, are prepared to quickly and comprehensively search through this new registry as done with sanctions lists, court records, and media reports for criminal and suspicious activity as part of ongoing risk management.

Whether the proposed AML regulations remain in the final 2021 NDAA is uncertain, and until such proposed changes are approved and take effect financial institutions, lenders, private equity firms, and other decidedly regulated businesses remain carrying the burden of investigating beneficial ownership as part of onboarding new accounts. Knowing this topic is gaining further attention by government regulators, it is more important now than ever before to ensure the proper due diligence—analyzing and verifying beneficial ownership data against what is collected in the onboarding process—is performed on these accounts not just upon account creation but throughout the lifecycle of the account.

Loan underwriting requires meticulous verification of prospective borrowers’ history to illuminate the risks involved before the pursuit of a lending relationship. A Boston-based client focused on commercial real estate investments is able to thwart untrustworthy borrowers by maintaining scrupulous standards for its underwriting deals and partnering Vcheck Global to uncover illegal activity and mitigate risk exposure.

This firm’s underwriting process requires all potential borrowers to complete a loan history questionnaire that poses all of the common questions associated with a commercial real estate loan—including the borrowers’ history with bankruptcies, foreclosures, major credit hits, and open litigation. “The borrowers simply answer ‘yes’ or ‘no’ for each question,” according to one of the senior underwriting analysts at the firm. “We understand that everybody has gone down different paths in life, so we give our borrowers the option to come clean and disclose any credit blunders that may have happened in the past.”

Such a questionnaire helps meet federal guidelines for commercial real estate loan underwriting to prevent illicit financing and funding flows, including the latest from the U.S. Treasury Department for combating money laundering and funding of terrorism. This firm maintains prudent standards that help prevent the lending of potentially millions of dollars to criminals.

Once a potential borrower has completed a loan history questionnaire, the information provided is then verified by Vcheck Global’s highly skilled team of investigators who use advanced technologies including artificial intelligence to follow the money and uncover possible fraudulent investment deals, contract disputes, and judgment enforcements. Vcheck Global’s investigators are trained to navigate regulations and search court records, judgment enforcements, sanctions and watch lists, media reports, and—as needed—procure human intelligence for deep-dive investigations of subjects associated with large, complex deals.

“This is where Vcheck comes in to save the day,” the analyst explained. “On many occasions the Vcheck reports have saved us from lending to untrustworthy people. I cannot count how many times where Vcheck’s reports have found major litigations, foreclosures and bankruptcies that were not disclosed to our underwriting team.”

One of the many ways potential borrowers may conceal their past from loan underwriters is through the use of aliases. In a recent Vcheck Global investigation for this client, a prospective borrower who answered “no” to all standard loan history questions was found to have been concealing a criminal history. Vcheck Global investigators found that the subject used a name change to hide previous criminal activity including a mail fraud case and charges of conspiracy to defraud the United States.

At the start of every investigation, Vcheck Global’s investigators unmask name changes or aliases by matching the alias to the social security number used on past transactions. Data from county recorder offices and courts, coupled with third-party database searches, can help identify changed names and aliases. For every alias or name change encountered, Vcheck Global investigators will perform manual searches of federal, state, and local records to identify any and all associated with a subject.

In the case of the prospective borrower with the alias and hidden past, Vcheck Global found additional charges associated with the subject’s new name including mail fraud and wire fraud before becoming an FBI informant as part of a plea deal to reduce prison time—on top of multiple foreclosures and judgments. “Vcheck’s reports laid out all of the credit hits in a clear way where we could make an informed decision to not pursue a lending relationship with this person,” the analyst said. “This is just one example of many where Vcheck has enhanced the client’s investment vetting process.”

Sources:

https://www.law.com/newyorklawjournal/2020/06/03/active-u-s-enforcement-of-anti-money-laundering-rules-continues-unabated/?slreturn=20200518125604

https://www.fdic.gov/regulations/laws/rules/2000-8700.html

Accomplished operations and business strategist Julie Peck has been appointed interim CEO and will lead Vcheck Global into the next stage of explosive growth.

Los Angeles, Calif. – April 23, 2020 – Vcheck Global, a leading provider of business-to-business investigative due diligence background checks, has appointed Julie Peck as interim Chief Executive Officer. Peck has spent her career creating tangible value for technology-enabled information-related businesses. She joins Vcheck Global from Exiger where she served as Chief Operating Officer and, prior to that, at Wolters Kluwer where she served as EVP and General Manager of WK’s Tax & Accounting Division in the U.S. Small Firms segment.

In her new role, Peck is supported by executive management team members Lyndee Fletcher, Maria Munley, Ken Blumenthal, Alex Sorin, and Sean Gil. Together, this team will lead Vcheck Global into a new stage of growth following strategies of digital transformation and automation, identified by the board’s leadership.

“Throughout my career, I have been fortunate to lead a number of businesses in the governance, risk and compliance (GRC) space and have learned the value of combining strong customer focus, excellent service and cutting edge technology to help compliance professionals do their jobs more effectively. Vcheck Global represents the absolute best combination of these attributes, and I’m thrilled to be able to bring my knowledge of technology and service to taking this great company to the cutting edge. These are complex times, and companies with the technologies, service orientation, and talent that Vcheck Global has will come out of this challenging time as the market leader in this space,” Peck said.

Prior to WK, Peck gained diverse expertise in the banking, publishing, software and information services sectors at Pitney Bowes, Gannett and The Bank of New York Mellon. She holds an MBA in Finance from the University of Connecticut.

Our mission at Vcheck Global is a significant one: to protect our clients by providing more information about the companies and people that they do business with. In the spirit of that mission, we have started an Employee Spotlight series, to feature more information about the ambitious, charming, and diligent team working to make Vcheck Global a success.

Today we’re featuring VP of Employment, Erwin Rodriguez. Erwin serves Vcheck Global by leading the pre-employment investigative team. In this interview, Erwin discusses how he developed his passion for the investigative field, his leadership style, and some valuable career lessons anyone can employ.

How long have you worked for Vcheck?

I started working with Vcheck Global in August of 2016.

What is your role at the company?

I am VP of Employment, however I started out as a due diligence investigator. Currently, I manage the Employment team. The Employment team handles the majority of background checks or requests we receive for employment purposes. All of those requests come through me to prioritize for the team.

Where are you from?

I was born and raised in Los Angeles. Culturally, I am Mexican and Guatemalan.

Before working at Vcheck Global, what was the most unusual or interesting job you’ve ever had?

I would say Vcheck Global is the most interesting job I’ve ever had. Before I came to Vcheck Global, I was working for a competitor doing pre-employment screenings as a research analyst. When I chose this career path it was more out of necessity. I studied construction management at California State University, Northridge and graduated at a time when construction management jobs were on the decline. A good friend of mine got a job with the aforementioned competitor, and he helped recruit me. Though I didn’t know anything about the industry, I soon discovered that I really liked the investigative field and developed a passion for it. I found similarities between construction management and investigative work, such as maintaining a schedule for every project with tight deadlines.

How did you end up coming to work for Vcheck Global?

At the beginning of 2016, I took a gamble and tried to get back into the construction industry after working in investigations. Construction seemed to be on the rise, so I resigned from my former employer and tried to get a construction management job. However, my experience in the industry after graduation was minimal and I didn’t have the requisites that construction management firms were seeking. Being that I developed skills in the investigative field, I realized this was my true career path. I found a job posting from Vcheck Global, and the rest is history.

How has Vcheck Global changed since you’ve joined?

The difference between Vcheck Global from when I started to today is like night to day. Having been ranked no. 634 among the top 5000 firms in the U.S., we are continually growing and improving as a business. The size of the firm when I started was under 20 employees, and now pushing 80 to serve the increasing volume of client requests. We are constantly working, even through what we once considered our slower season.

What has been your most memorable moment at Vcheck Global?

I will always remember the feeling of being promoted to this position of VP of Employment and getting the opportunity to lead a team. It’s a great honor to have upper management and my colleagues recognize me as a great asset to the company. They gave me a chance to take on this leadership role even though it’s new to me. So far I haven’t let anyone down, and I continue to strive to be the best team member—not only to my team, but to the rest of the company.

What do you enjoy most about your role?

I am able to hear my team’s concerns or questions and be a voice for them with upper management. I receive questions, concerns, ideas of improvement, and other feedback from members of my team and other employees. They know that they can come to me and use my platform as a team lead and VP to push their message forward. I believe this is valuable to our company culture.

What do you find most challenging about your role at Vcheck Global?

The most challenging part about my role is managing a team. Coming from strictly doing reports on my end, now I see the behind-the-scenes items such as administrative duties that need to be taken care of as being a team lead. So far I think I’m doing a great job with that. I never back down from a challenge.

What advice would you give to recent, new hires?

The best advice I could give to a new hire is to always work hard and ask questions. People may think that hard work goes unnoticed, but it’s the complete opposite. Our company does notice when you work hard. People at times can be afraid of asking questions. I believe no question is deemable as “dumb,” rather a starting point to conversations that at the end may lead to improvements as a company continues to grow.

What are three career lessons you have learned thus far?

Do not be afraid to ask questions. Hard work will get you far in life. Enjoy the work you do. When work doesn’t become actual work, when you’re passionate about what you do, you will go far.

Do you have a motto or personal mantra?

The Mamba Mentality. When you put in the time, you will achieve greatness. Having that mentality is what has led me to where I am today.

What did you want to be when growing up?

When I was younger, I wanted to be an architect. In my mind and like in many, you have an idea of what career path you choose. I think now, where I am today, I’m glad my career path shifted and guided me into the investigative field.

What does a typical day look like for you?

In this new position, it’s a 24/7 role. I always want to be available to address client communications, team questions, overall be here for whatever may be needed of me. I come into the office with one goal, making each day better than the last. I handle administrative duties of team lead, help my team with reviewing reports and conducting investigations, and assist my fellow colleagues with any questions they may have. I’m always available for our clients and for our team.

The sheer size and significance of Foreign Corrupt Practices Act (FCPA) fines and enforcement actions over the past few years, with 2019 marking a peak year of FCPA enforcement, are good indicators that SEC and DOJ enforcement will continue their upward trend for the foreseeable future. Moreover, the role that third-party risk occupies in these actions reinforces the need for organizations reliant on third parties in high risk jurisdictions to obtain “finished intelligence products” as part of their due diligence rather than surface-level screenings and traditional public records research alone. By finished intelligence products, I am referring to due diligence investigations that combine both deep-dive open source research (OSINT) as well as human-intelligence inquiries (HUMINT), also known as source inquiries in the industry, which not only identify risks but convey the significance and long-term implications of those findings.

The Role of Source Inquiries in ‘Finished Intelligence Products’

Source inquiries represent a critical step in conducting integrity due diligence, particularly in jurisdictions that have historically posed a high FCPA risk and/or have sparse public records availability. Transparency International’s Corruption Perceptions Index visualizes what these high risk jurisdictions are, although some of the jurisdictions on its heat map do not accurately capture high levels of corruption in certain countries, so it should be referenced in conjunction with additional tools. While source inquiries may not always result in a smoking gun, a synergy of OSINT and HUMINT provides a fuller understanding of a target’s risk profile. Furthermore, neglecting source inquiries with regard to high risk relationships exposes decision makers to the worst risks of inadequate due diligence. Inflammatory information found in public sources should be corroborated, contextualized, or debunked before making a decision based on such information.

Map courtesy of Transparency International

Traditionally, conducting source inquiries has consisted of obtaining reputational commentary on a company and its principals. This commentary helps assess the subjects’ past performance and any risks associated with them, including corruption, litigation, sanctions, and political exposure. These lines of inquiry cannot be overlooked. However, companies or their due diligence providers often fall into the trap of “due diligence tunnel vision” by failing to obtain a broader analysis when initiating an investigation that contains both OSINT and HUMINT elements, which can enhance visibility into different forms of risk, contextualize the findings, and convey the findings’ long-term implications. These implications can range from business and ethical concerns (including FCPA-focused issues) to understanding how your partner manages their business in shifting regulatory environments and foreign markets.

Sample Scenario: Understanding Risk Through a Finished Intelligence Product

A majority investor in a Latin American mining company is considering a foreign state-owned partner in a development project. The foreign partner is a mining company that has operated throughout the region, having been involved in several high-profile projects. The majority investor needs to identify any high-level risks associated with this potential partner. In many instances, traditional due diligence investigations can uncover red flags reported in media, litigation databases, regulatory enforcement records, and high-level source inquiries; however, these findings alone may not be enough to provide a complete picture of an event and, in most instances, will not provide the necessary context to help you understand the political, cultural, and industry-specific risks at play.

In order to avoid due diligence tunnel vision one must think outside the box and ask the further probing questions to uncover, corroborate, or alleviate potential risks:

As a state-owned company, what has been the appetite of the potential partner and its government to allow local companies and their management to operate unencumbered?
Have other state-owned entities from this nation operating in the region shown an increasing commitment to corporate governance and compliance, and is it genuine throughout the tenure of the project/partnership?
Several years ago, the potential partner was fined significant amounts for environmental violations resulting from weak corporate governance. Since then, the company has enacted what appear to be serious reforms to prevent future incidents. Are the company and government committed to genuine environmental controls and strong corporate governance, or are these superficial measures?
The partner is one of many foreign companies that prefers to send their management abroad to oversee its business operations, which are in turn staffed by locals. This policy often leads to cultural tensions and clashes between the foreign management and the local populace. How has the partner managed this trend within its own operations? Are the circumstances of the project ripe for a potential conflict between foreign management and the local population?

These considerations and how they play into a target’s risk profile can be answered through a ‘finished intelligence product’ that deploys comprehensive OSINT and source inquiries that provide contextual risk analysis and are not so focused on the rear-view mirror that they miss what may lay ahead. Merely inquiring about the subject’s past performance and industry reputation cannot provide adequate information to make an informed decision.

Thinking outside the box of traditional lines of inquiry will result in broader insight into both immediate and long-term risks. Outside the box thinking in the context of due diligence includes understanding the nexus of OSINT research and human intelligence inquiries. By asking specific questions that are informed by public records information, raised by initial source inquires, and tailored to the industry and/or jurisdiction in question, a ‘finished intelligence product’ will not only identify relevant risks, but will deliver the proper color and context to alleviate or validate concerns that on the surface appear to be showstoppers but may be more complicated or benign than initially thought.

Alex Sorin is a Director at Vcheck Global and leads the company’s human intelligence driven due diligence Level II product.

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Our mission at Vcheck Global is a significant one: to protect our clients by providing more information about the companies and people that they do business with. In the spirit of that mission, we have started an Employee Spotlight series to feature more information about the ambitious, charming, and diligent team working to make Vcheck Global a success.

Today we’re featuring Managing Director Adam Fromowitz. Fromowitz serves Vcheck Global by cultivating relationships with prospects, clients, and colleagues. In this interview, Fromowitz discusses his roots in customer service, why sales is the most difficult job, and the importance of mindset and hard work.

How long have you worked for Vcheck Global?

I have been with Vcheck Global since September 2019.

What is your role at the company?

I currently serve as Managing Director, with a focus on Business Development. I am responsible for driving new business with law firms, private equity firms, investment banks, and corporations. Additionally, I am tasked with mentoring junior sales representatives at the company.

What does a typical day look like for you?

No two days are the same for me. When I’m in New York, I try to be at my desk by 7:30 a.m. From there, it is a mix of emails to clients/prospects, phone calls with clients/prospects, in-person meetings (internal/external), travel preparation (conferences, one-on-one meetings) and collaboration with our operations team to ensure that reports tied to all outstanding orders are delivered at the highest quality and on time. No stone is left unturned. There is also time spent with junior members of our sales organization to craft strategies on how to drive in new business and oversee the execution of those strategies so that we are positioned to win over time. I usually leave the office by 6:30-7 p.m. and ideally attend a local networking event, or have dinner/drinks with clients/prospects.

Where are you from?

I am originally from Long Island, New York—specifically 45 minutes outside of Manhattan in a town called East Meadow.

Before working at Vcheck Global, what was the most unusual or interesting job you’ve ever had?

Customer service has always been a passion of mine. When I was in high school, I was a bank teller for North Fork Bank (now CapitalOne). In 2005, I was the employee of the year in my branch as a part-time employee. How many times have you seen a customer wait for a specific teller at a bank? I am proud of the fact that I had regular customers, some coming to the branch every other day, every week, or every other week to work with me. I also worked for Uncle Louie G’s Italian Ices & Ice Cream Shop, where I was mostly paid with tips. That job was a lot of fun and I never went home on an empty stomach. As far as the most unusual job I’ve ever had, I think Vcheck Global is it.

What makes working with Vcheck Global so unusual?

I’m engaging with different people every single day. When others learn that I work for a due diligence and background investigations company, a million questions follow. “What is the wildest thing the firm has ever uncovered?”, “Do you work with former law enforcement?”, “Have you looked into me?”, “Can you look into my husband/wife?”. This is not a standard profession. A lot of people are intrigued by what we do and how we do it.

How has Vcheck Global changed since you’ve joined?

The business is maturing in a lot of different ways. We started with a handful of employees in our Los Angeles headquarters in December 2012 and now we have over 80 full time employees, spread across four different locations (Los Angeles, New York, Boston, Washington D.C.). We also work with former law enforcement and journalists in 150 countries, who regularly assist with our investigations. We have onboarded top talent from the industry, and rolled out new solutions for our clients. Lastly, we have defined new roles across the organization, refined our approach to sales and mapped out a clear path forward for all. We’re excited about where things currently stand and where they are going in 2020 and beyond.

What has been your most memorable moment at Vcheck Global?

My most memorable moment at Vcheck Global was tied to the first order that I brought in. When joining a new organization, especially in a sales capacity, bringing in business does not necessarily happen overnight. It takes planting seeds, following up, and cultivating relationships. Seeing that first sale come through was validation that the process is working and created a sense of joy that the client and company will benefit from the transaction.

What do you enjoy most about your role?

We are in the business of protecting our clients by providing information about the people and companies they consider doing business with. I love the fact that our solutions allow our clients to mitigate risk and put them in a better position to succeed. From the time orders come in, to the time our reports are delivered, I deliver a ‘white-glove’ solution to ensure the customer experience meets or exceeds service level expectations. The repeat business we get from virtually every client makes me proud to work for Vcheck Global.

Additionally, I truly love coaching our junior sales team members. Whether it is refining a cold call approach, sharing email message templates that I’ve created and tested with positive results, or coaching them through the process of conducting an effective meeting, I enjoy setting them on the right track and playing a small part in their wins. Every win for each sales representative is a huge win for the organization.

What do you find most challenging about your role at Vcheck Global?

I think that sales is one of the most difficult things to do in business, but I love the challenge. You typically have one shot to make a positive impression on your prospect and plant that seed. They may not be ready to buy that day. It’s a real challenge to get someone’s attention and stay top of mind. With the right amount of persistence and a little bit of luck, you’ll get your shot eventually. From there, it’s on you to deliver.

What advice would you give to recent, new hires?

Do not be afraid to roll up your sleeves and work hard. Jump in with both feet, and look to improve and grow as an individual and a teammate every single day. We don’t want to work with C+ or B- players. We want A students across the board!

I joined this organization because I was so impressed with what Shai, Seth, Adam, and Ken bring to the table. I would hope that anyone else who joined the organization will bring that same energy and passion to the mix.

What are three career lessons you have learned thus far?

As a salesperson, you have to understand that rejection comes with the territory. Give it your best, hold your head high and conduct yourself like a gentleman, regardless of the outcome, and you will earn people’s respect.

90% of life is just about showing up. You can take that line and apply it in so many ways. How it relates to Vcheck Global—we have the most persistent and present sales team in the industry. We go to conferences, events, and one-on-one meetings every day and because of that, we give ourselves an opportunity to win.

It’s very important to treat everyone well, from the Janitor to the Chairman of the Board. At Vcheck Global, we provide a team-oriented service. From sales to investigators to customer service, we work collaboratively to ensure that our clients’ service level expectations are exceeded. If you don’t treat everyone in the organization well, then why should they bend over backwards to help you out? People will go out of their way to help you if they feel valued and respected.

Do you have a motto or personal mantra?

“Those times when you get up early and you work hard, those times when you stay up late and you work hard, those times when you don’t feel like working, you’re too tired, you don’t want to push yourself, but you do it anyway. That is actually the dream. That’s the dream. It’s not the destination, it’s the journey.” – Kobe Bryant

What did you want to be when growing up?

I wanted to be the shortstop for the New York Yankees. That dream died in middle school when I saw my first curveball. I knew at that point I was going to find something else. I’m still very passionate about the Yankees, though. I’m currently planning a trip to Cooperstown, New York, to watch Derek Jeter get inducted into the Hall of Fame this summer.

Today we’re featuring one of our team leads, Dianne Ruiz. Dianne serves the company by managing our team of quality control associates, who perform final reviews of our due diligence reports for thoroughness and accuracy. In this interview, she addresses her goals for her team, how she deals with adversity, and her recommendations to new hires.

How long have you worked for Vcheck?

I first joined the team in September of 2018.

Before working at Vcheck, what was the most unusual or interesting job you’ve ever had?

The most interesting job I had prior to working in the investigative field was writing for a local magazine based in Los Angeles, California. I covered the entertainment segment, therefore I was given the opportunity to attend the Oscars, LA Fashion Week, musicals, and several elite restaurants, to name a few. In addition, I had the pleasure of meeting some of the most profound business owners of upcoming businesses throughout the city. It was a great opportunity for me in my professional development, as it allowed me to hone my networking skills and foster everlasting relationships with some of my greatest mentors that continue to thrive in the entertainment industry.

How did you end up coming to work for Vcheck?

I was looking for an opportunity to be a part of a growing company. I knew Vcheck would be the perfect fit. It was the best decision I made professionally, as they truly valued my professional aspirations and allowed me to grow within the company.

How has Vcheck changed since you joined?

Since joining Vcheck, I have seen the company continuously grow. It’s exciting to work alongside such a talented team. As we continue to scale, I firmly believe it’s important for Vcheck to continue to differentiate themselves as a company in the industry.

What has been your most memorable moment at Vcheck?

There are several memorable moments at Vcheck that I have experienced personally, however, what never fails to stand out most for me has been discovering everyone’s success stories.

What do you enjoy most about your role?

Everyday I am reminded that my roles and responsibilities impact more than one person. Therefore, I ensure that there is full transparency within my team. What I enjoy most is leading a strong team of highly skilled individuals that I continue to learn from. My goal is to create processes that not only help facilitate our duties internally, but also ensure that we continue to cultivate a collaborative environment. My personal goal in to ensure every team member feels valued and appreciated.

What do you find most challenging about your role at Vcheck?

Challenges remind us that there is always room for growth. Knowing that the company’s reputation is heavily dependent on the quality of service that we provide to our clients, there are high expectations in place. Therefore, I make it a goal to ensure that the QC department remains knowledgeable in the industry and continues to deliver top quality reports. Although there are days that do seem challenging, I never feel discouraged when I am faced with any form of adversity, because I know that there is always a solution. It’s important to have a solution-based mentality and communicate in the most effective way.

What advice would you give to recent new hires?

I would encourage new hires to remain inquisitive and always be a team player!

What are three career lessons you have learned thus far?

Never stop investing in your future.
Surround yourself with positive influences who are not afraid to challenge you.
Displaying emotional intelligence goes much further than you think.

Do you have a motto or personal mantra?

Yes – I am inspired by this great quote: “Character is the real foundation of all worthwhile success.”

Navigating how legal information is gathered, parsed, and disseminated is a challenge as regulatory complexities vary from one jurisdiction to the next, domestic and foreign. Regulatory environments across Latin America are no different, making the job of international due diligence investigators a challenge in complex judiciary systems such as those in Brazil, Peru, and Mexico.

Investigative due diligence is a dynamic field itself, yet in the international sphere, specifically Latin America, the types of information available on subjects can be confusing—especially when it comes to litigation. Latin American countries are known for being particularly litigious; if a subject or business entity is based in Latin America, the chances of having been involved in at least one civil litigation matter is relatively high.

In Brazil, businesses quite often sue government over the collection of taxes. As a result, some entities placed on government lists for tax violations are likely battling government in court. It is not always clear cut as to whether or not a company has violated tax laws. International due diligence investigation reports must be transparent about such caveats.

As a country, Brazil does not rank well on Transparency International’s Corruption Perception Index, which grades countries on a scale from zero (representing the highest level of corruption) and 100 (representing the least corrupt). According to a 2018 report, Brazil and Peru both received a score of 35.

A recent Vcheck Global Investigator article discussed how deficiencies in Peruvian banks’ anti-money laundering systems, coupled with a failure among banks to report suspicious accounts and activities, led to billions of illicit funds flowing through the Peruvian finance system since 1998. Those funds have been tied to drug trafficking, tax evasion, illegal gold mining, and corruption—activity that can become fuel for litigation in Peru. Again, it is incumbent upon the international due diligence investigator to be fluent in government regulation to build a case that accurately represents a subject or entity’s involvement in litigation.

Similar regulatory complexities are found in Mexico, which fared worse than both Brazil and Peru on the Corruption Perception Index with a score of 28. More than half of Mexico’s population reported having to pay bribes to use public services, according to a recent article published by Vcheck Global.

Moreover, all civil litigation records in Mexico are publicly available and every step is catalogued. While this may seem beneficial to the public, superfluous information clutters court case dockets. International due diligence investigators working on cases in Mexico must have a thorough understanding of the judicial system to avoid costly misinterpretations.

Regulatory systems across Latin America can be just as complex as those found in Mexico, Brazil, and Peru. Unfortunately, there are citizens, business entities, and politicians working hard every day to make sure that corruption goes unnoticed. Expert investigators in Latin American regulatory systems, such as those working with Vcheck Global, are equipped to navigate these issues as they speak native languages and have access to sources on the ground if necessary. They know what tools to use and paths to follow to uncover corruption and help prevent costly and even dangerous relationships from forming.

JJ Davis is an International Due Diligence investigator whose primary area of expertise is Latin America. He is currently studying Intelligence Operations through American Military University and graduated from Boston University in 2016.

Sources:

Transparency International’s Corruption Perceptions Index 2018
Billions in Illicit Cash Reportedly Entered Peru’s Financial System
Latin America Struggles in its Fight Against Corruption

LOS ANGELES, October 22, 2019 – Vcheck Global, a leading provider of business-to-business due diligence background checks, is delighted to announce the hiring of Adam Fromowitz.

Fromowitz brings nearly a decade of experience in financial, technology, and professional services to his new role as a Managing Director for Vcheck Global. Prior to joining Vcheck Global, Fromowitz served as Vice President of Sales for American Stock Transfer (AST), helping his clients streamline mission-critical operations, increase efficiencies, and remove operational obstacles so that they could focus on moving their companies forward. During his three-year tenure at AST, Fromowitz played an integral role in the growth of the company’s East Coast operation. He also served in a number of different roles at Ipreo, which was acquired by IHS Markit in 2018.

On Fromowitz’s hiring, Vcheck Global COO Lyndee Fletcher stated, “Adam’s passion for forming meaningful and lasting relationships with his clients at corporations, law firms, banks, and private equity firms aligns with the culture we are setting at Vcheck Global. We are thrilled to have him on the team.”

Fromowitz holds a bachelor’s degree in finance and marketing from the University of Maryland, College Park.

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About Vcheck Global

Vcheck Global is a business-to-business provider of due diligence, background checks, employment screening, document retrieval, and specialized research of both business entities and individuals. Vcheck Global protects its clients by providing essential information about the people and companies they do business with.

For more information regarding Vcheck Global please contact us at [email protected] or call us at (888) 740-0747.

Today we’re featuring one of our more recent hires, Maria Munley. Maria serves the company by ensuring our company’s business operations are consistent with the law and that our departments and employees operate within company policy. In this interview, we uncover the interesting path that took her working at the United Nations after college to eventually joining Vcheck, as well as her affinity for a specific Scranton-based pizzeria.

How long have you worked for Vcheck? I joined Vcheck in May 2019 as the first hire on the Legal & Compliance Team. It’s been really fun so far.
What is your role at the company? I am heading up Vcheck’s Legal & Compliance team, and am the company’s Counsel and Compliance Officer. In my role, I work to ensure that we are compliant with applicable laws and regulations, internal policies and procedures, and keep an eye on developing standards for our industry. Since we are an investigations and due diligence company, we operate within federal laws, like FCRA, and state and country-specific laws, including privacy laws. I work closely with our great team of investigators, managers, sales, and client relations teams, that in turn work closely with our clients to ensure that we are delivering the best product possible.
Where are you from? I grew up in Scranton, Pennsylvania, popularly known as the fictional location of the TV show The Office. I love the show because it features real businesses, memorabilia, and places from Scranton. Team Alfredo’s pizza.
Before working at Vcheck, what was the most unusual or interesting job you’ve ever had? After I graduating from college, I worked at The United Nations Headquarters in New York. It was an enlightening experience–my coworkers were from all over the world, and I was able to attend meaningful and impactful events held at the UN. During law school, I had some equally beneficial learning experiences interning with Homeland Security and The Department of Justice. I’ve also had small jobs in high school as a pianist, and in a coffee shop.
How has Vcheck changed since you joined? Vcheck has grown leaps and bounds in the short time since I joined. The company headcount has grown by 25% and we have been increasing both revenue and production month over month. We were named for the second year in a row to the Inc. 5000 list of fastest growing companies in America, and as one of the fastest growing investigations companies. We’ve been featured in other publications for the work we are doing across multiple industries. We opened a new office in the Rosslyn neighborhood of Arlington, Virginia, adding to our existing office footprint, which includes offices in Boston, New York, and our Headquarters in LA. Talented new hires with a diverse range of experience and skills have joined the the team in investigations, sales, management, finance, and tech. We have added high level new product offerings, and we are continuously on-boarding brand recognizable clients, including financial institutions, multinational firms, and tech companies. There are many other things in the works; it’s a very exciting time for the company and the momentum continues.
What do you enjoy most about your role? I love working with all of our teams and helping ensure that our employees are constantly growing in their knowledge, skills, and engagement. “Compliance” can sound intimidating, but increasing our knowledge about how we can effectively operate within constraints increases accuracy, while also increasing employee skills and client satisfaction. Learning new things is part of successful career growth.
What advice would you give to recent new hires? I would encourage all new hires to set up time with their coworkers to chat about their roles, responsibilities, and learn more about other teams and new areas of expertise. We have a great team of engaged and knowledgeable employees who are more than happy to share their personal stories, career paths, and skills gained from varied experience. There may be an area or work product that a new hire is not familiar with and will want to grow towards.
What is the best career lesson you have learned thus far? I had an inspiring female leader and supervisor during a position in college. The advice she gave her employees was: it’s OK not to know something, but it’s not OK to tell someone you do not know the answer to a question and end there. Your response should always be “I don’t know, but I will find out for you.” That advice, to find out, follow up, and follow through is one of the best pieces of advice I have received. To demonstrate care, empathy, willingness to help, and the importance of someone else’s concerns benefits both parties in their learning, growth, and relationships. It’s great customer service, whether your “customer” is a friend, a coworker, or a paying client.
What advice do you have for prospective Vcheck candidates? I highly encourage prospective candidates to check out our social media pages, LinkedIn, Instagram, and our website. Research the profiles and experience of our existing employees, and reach out to current employees to ask them about their experience and express your interest! Everyone knows what it’s like to be a candidate interested in a new role, and our team is happy to speak with prospective hires about the work we do and company culture. Interested candidates should not be intimidated to apply – in our industry, an eager, go-getter attitude can outweigh tailored experience. If we do not have the exact position open, and a candidate loves the company and can offer a new idea, reach out and pitch it! I would also mention our flex work, bonuses, benefits, generous PTO, nice office spaces, great managers, and company snacks, lunches, and team outings.

People often change their names or use aliases to disguise their past. In a recent case investigated by Vcheck Global, an individual was found to have more than $15 million in debt owed as a result of three county civil court judgments associated with an alias—and that’s not all. This individual had essentially changed his name to hide bankruptcy and both local and federal court judgments against him.

At Vcheck Global, it is our standard procedure to unmask changed names or aliases once we start an investigation. Third-party databases are a useful resource for uncovering an individual’s aliases because they are tied to his or her social security number (SSN). Whenever a person uses an alias to conduct a transaction in which they have to provide their SSN, these databases typically store that alias. Third-party databases should be used in conjunction with data from courts and county recorder offices, which are usually the best resources for helping identify aliases and name changes.

Name changes are typically filed as a civil petition with a county court, making the information public. Yet there have been instances where a subject has had numerous name changes, and it becomes a task to figure out the dates of each name change. For every alias that our investigators encounter, Vcheck Global manually searches county, state, and federal records.

For example, the subject of a recent investigation went by various aliases. The databases we use picked up on all but one of those aliases. When we searched the subject’s name was against a county court records terminal, we uncovered an additional alias. As it turns out, the court had used a misspelling of the subject’s name. When we searched the misspelled name, we uncovered even more records that were clearly associated with the subject.

In a separate investigation, a client provided us with a subject’s name that ended up being false. When Vcheck Global figured out what the subject’s name was, they uncovered that his claims to our client of being from a wealthy family of Greek investors was untrue. In fact, the subject had declared bankruptcy a few years prior. He was trying to get our client to invest in one of his “companies,” which were not established corporations. Our client was puzzled by the findings and decided to have Vcheck Global conduct an international investigation on him, which yielded no evidence about his past or his supposedly wealthy ancestors in Greece.

Uncovering aliases and name changes can yield several key points of information about a subject, including the following:

Hidden past such as civil litigation, criminal records, judgments, tax liens, and bankruptcies
Hidden assets
Derogatory media coverage
Poor credit history
Social media alias accounts

At Vcheck Global, our approach to any investigation is unique in our ability to effectively utilize artificial intelligence and automation with the manual effort of investigators poring through data to build the most accurate report possible. It is our refined and tested process that empowers Vcheck Global to help individuals and companies avoid litigation and other unnecessary consequences of business dealings.

Tania Alvarado is Assistant Vice President of Investigations at Vcheck Global. She is an experienced investigative analyst with a demonstrated history of working in the security and investigations industry. She holds a master’s degree focused in criminal justice from Fairleigh Dickinson University and a bachelor’s degree in law and society from Ramapo College of New Jersey.

Vcheck Global, a leading provider of business-to-business due diligence background checks, is pleased to announce the hiring of Alex Sorin.

Sorin joins Vcheck Global after having served at a risk and compliance due diligence firm as the Global Head of Human Source Intelligence, where he led the company’s source inquiries product. Sorin is an expert in human intelligence-driven due diligence, managing international due diligence investigations, and instituting research best practices. Sorin began his due diligence career at Kroll, where he led and conducted numerous international investigations with a focus on the Middle East. Sorin is fluent in Arabic and Hebrew.

Lyndee Fletcher, COO of Vcheck Global, commented, “At Vcheck Global, we have prioritized acquiring top talent to support our goal of being the industry leader in international investigations and enhanced due diligence. By hiring Alex, we have brought on an industry leader to spearhead that effort.”

Sorin is the founder of the Arabic, Hebrew, and Russian language learning website Foreigncy.us. He holds an MA in Islamic and Middle Eastern Studies from the Hebrew University of Jerusalem’s Rothberg International School and a BA in Near Eastern Studies from the University of Arizona.

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About Vcheck Global

Vcheck Global is a business-to-business provider of due diligence, background checks, employment screening, document retrieval, and specialized research of both business entities and individuals. Vcheck Global protects its clients by providing essential information about the people and companies they do business with.

For more information regarding Vcheck Global please contact us at [email protected] or call us at (888) 740-0747.

Today we’re featuring one of our Senior Associates and recent Vcheck Global Employee of the Month, April Kelemen. The first investigator hired at Vcheck, April contributes to the company’s quality control process by reviewing reports for thoroughness and accuracy while also serving as interim team lead of the company’s Credit department.

How has Vcheck changed since you’ve joined?
I cannot even begin to answer this. I was the first investigator hired so basically everything has changed!

What advice would you give to recent new hires?
The career lessons I have learned are to take risks and push yourself to try new things, ask for help when you need it, and be willing to accept constructive criticism and learn from it.

What are three career lessons you have learned thus far?
The career lessons I have learned are to take risks and push yourself to try new things, ask for help when you need it, and be willing to accept constructive criticism and learn from it.

The international real estate market is a well-worn tool for laundering illicit cash. Terrorist organizations and conflict financiers launder millions of dollars through high-end luxury real estate purchases in Dubai to evade U.S. sanctions, according to a 2018 report from the Center for Advanced Defense Studies. But even in purportedly transparent democracies such as Canada, real estate has become a tool for evading government scrutiny—a concern Vcheck Global is constantly vigilant of when investigating real estate transactions.

The real estate markets in Vancouver and Toronto have become hotbeds for money laundering activity. Transparency International Canada reported finding $28.4 billion in opaque investments in greater Toronto housing since 2008. According to a C.D. Howe Institute report from May 2019, 99.9 percent of money launderers in Canada are never caught. Ironically, Canadian real estate has become so popular with money launderers because of its strong legal regime.

Canada’s privacy laws tend to create incentives to launder money through Canada instead of more autocratic regimes. While jurisdictions like the British Virgin Islands and the Cayman Islands have been criticized for shielding the beneficial owners of their corporations from scrutiny, Canada’s regulatory regime does the same. Moreover, Canada’s financial intelligence agency, FINTRAC, is hamstrung by its inability to demand further information from financial institutions about reported suspicious transactions. Unless a law enforcement agency seeks information about a specific target from FINTRAC, those suspicious transactions may go uninvestigated.

Canada’s regulators have also failed to apply sufficient scrutiny to cash purchases of real estate. While mortgage lenders and other financial institutions are required to conduct due diligence on counterparties, cash and privately financed purchases are almost entirely ignored.

The Canadian federal government has committed to cracking down on money laundering. The most recent budget, passed in April, committed nearly 200 million Canadian dollars to anti-money laundering efforts, including a dedicated real estate monitoring task force. The government has also placed additional pressure on financial institutions to provide financial intelligence to FINTRAC and law enforcement. Additionally, some provinces have gone even further—British Columbia created a transparent land registry, requiring anonymous corporations and trust funds to register their beneficial owners prior to purchasing real estate.

While these reforms may help stem the flow of illicit money into Canada, they create additional compliance hurdles for anyone transacting in Canada’s real estate market. With the government’s newfound focus on catching and prosecuting money launderers, it is more essential than ever for anyone selling or purchasing real estate in Canada to conduct due diligence on the beneficial owners of corporations involved in the transaction.

Ishan Sawai is an investigator at Vcheck Global LLC, specializing in the Middle East and North Africa. Prior to joining Vcheck Global, he worked as an intern at the Treasury Department’s Office of Foreign Assets Control, investigating sanctions evasion.

http://www.fintrac-canafe.gc.ca/fintrac-canafe/definitions/money-argent-eng.asp
https://www.fatf-gafi.org/media/fatf/documents/reports/mer4/MER-Canada-2016.pdf
https://business.financialpost.com/diane-francis/canada-ignored-its-gigantic-money-laundering-problem-for-years-and-lawyers-fanned-the-flames
http://www.transparencycanada.ca/news/billions-unknown-funds-flow-toronto-real-estate/
https://www.cbc.ca/news/business/money-laundering-canada-1.5138346

Today we’re featuring one of our Senior Associates and recent Vcheck Global Employee of the Month, Sara Bednarcik. Sara serves the company by performing thorough reviews of due diligence reports for accuracy and quality control. In this interview, we uncover her personal mantra and how her childhood dream job might have influenced her path to working for Vcheck Global.

How long have you worked for Vcheck Global?

July 7, 2019 marked my three-year anniversary with Vcheck Global; however, with the amount of knowledge and experience I have gained during this time, it feels like it has been a lot longer (not in a bad way).

What is your role at the company?
My title is Senior Associate, Quality Control. This role entails reviewing due diligence reports to ensure that they are accurate and of high quality.

How has Vcheck Global changed since you’ve joined?
Vcheck Global has grown exponentially since I joined the team. It started out as a very small company with a handful of employees and is now a company that continues to grow and function like a well oiled machine.

Do you have a motto or personal mantra?
Not necessarily but I made my personal email address “letsdothis” since I find that statement to be inspiring. It’s always good to actively be doing something whether it is going on an adventure, learning about something new, or launching a new business.

What did you want to be when growing up?
A detective. That may be how I ended up in my current position as it involves investigating and I find it to be enjoyable.

Primarily reserved for informal communication, a blended writing code known as Arabizi is now spreading beyond the realm of social media and finding its way into print media such as newspapers, books, and advertisements. Arabic language research is a key part of Vcheck Global’s foreign language investigations, particularly because many tweets are typically written in Arabizi as opposed to Arabic. The frequency of cases requiring Arabizi translation, including a Lebanese case from June, highlights how proficiently navigating all facets of foreign languages is essential in delivering contemporary due diligence reports.

Arabizi is a blend of عربي (/ʕarabiː/, Arabic) and إنجلیزي (/ʔingliːziː/, English) is arguably the most commonly used term for the ad hoc romanization of Arabic, although Arabish and Arabic chat alphabet, among others, are also used. Arabic was romanized, or transliterated from the original scripts to Latin script, into what is now known as Arabizi as a way for people to more easily use electronic communication technology such as short message service (SMS) and texting using a messenger or social media application. These technologies were once dominated by the character encoding standard known as American Standard Code for Information Interchange, which did not accommodate for languages outside of Latin script.

The increasing popularity of smartphones and messaging services like WhatsApp has caused a reduction in the use of many romanizations. For example, Russia’s Volapuk encoding and Translit and Greece’s Greeklish are now virtually obsolete. Yet even with the advent of unicode, which opened the floodgates for SMS and other electronic communication technologies to allow for Arabic and other non-Latin languages, Arabizi remained popular for several reasons.

One reason Arabizi remains popular is that, unlike some scripts such as Cyrillic, Arabic does not have a distinction between uppercase and lowercase. “The use of capital letters [in Arabizi] indicates yelling, excitement, emotions or calls for special attention (as with most messaging systems),” according to an article published in MIT’s Design Issues in 2008. Capitalization is not possible with the Arabic script but can be an asset in non-verbal communication.

Another reason for Arabizi’s sustained usage is its ability to keep SMS text messaging costs low. Unicode SMS messages in Arabic max out at 70 characters each, whereas a single SMS message can accommodate up to 160 Latin characters. When paying per message, Arabizi allows people to communicate more for less. A 2018 study of Arabizi conducted in Saudi Arabia reached the conclusion that, “…although Arabizi users have access to an Arabic keyboard and communicate with those who understand Arabic, they still resort to Arabizi, which is a marker of youth identity and solidarity.”

Language is fluid—new slang and code is being created by people all over the world at any given time. Vcheck Global’s International Office has in-house experts fluent in several languages and maintains active relationships with language experts on the ground in countries across the globe. These experts continually study modern linguistics and translations, ensuring Vcheck Global reports include all valuable information regardless of language.

Brittany Thayer is an investigator based out of Vcheck Global’s office in Boston. Vcheck Global Investigator Ishan Sawai contributed to this article.

`Sources:`

Alghamdi, Hamdah; Petraki, Eleni. 2018. “Arabizi in Saudi Arabia: A Deviant Form of Language or Simply a Form of Expression?” Soc. Sci. 7, no. 9: 155.

Yaghan, Mohammad Ali. ““Arabizi”: A contemporary style of Arabic Slang.” Design Issues 24, no. 2 (2008): 39-52.

As one of the most popular offshore financial centers, the Cayman Islands has attracted tax evaders, drug dealers, and even terrorists, who have used shell companies to conduct illegal activities. Though many businesses registered in the British territory are legitimate—given that approximately 60 percent of global hedge fund assets are domiciled there as of 2016—a recent case conducted by Vcheck Global shows the importance of conducting a thorough background check on companies registered in the Cayman Islands.

In May 2019, Vcheck Global handled a case investigating an entity in the Cayman Islands. As it turned out, the entity is entirely controlled by a Chinese residential real estate company that was involved in a series of consumer rights lawsuits. Court records in China also showed that the company had a bank account that was subject to enforcement of a judgment. Since then, the company’s reputation among Chinese consumers declined substantially.

The Cayman Islands is popular among real estate businesses, hedge fund managers, and many others for a reason. Depending on the circumstances, company registration may take as few as two days to complete. The Cayman government also does not tax the capital gains of investment funds. Operation costs for offshore funds can be substantially lower compared to that in investors’ home countries. In addition, the business environment in the Cayman Islands is adaptive to the needs of investors in the U.S., Europe, and Asia. For instance, it is one of the few jurisdictions that offers the limited liability corporation (Cayman LLC) structure.

However, these benefits sometimes come with associated risks, particularly for the offshore funds’ business partners. With lower level of regulations, some offshore funds might have the outward appearance of an active entity but are little more than empty shells that manage the money in it and cover up the actual owners. Other entities might have ties with companies outside the Cayman Islands, which investors may not be aware of. In response, investigators in the due diligence industry are developing new multilingual databases and tools to better assess potential risks associated with offshore entities.

With the ongoing trend of companies establishing entities offshore, only comprehensive international due diligence can uncover adverse information that may prevent costly business decisions. Vcheck Global aims to provide due diligence products of the best quality to help assess whether business partners are in compliance with local and international regulations. In the case of the Chinese real estate company, Vcheck Global’s investigation helped prevent potential entanglements in lawsuits or fraudulent schemes.

Sun Shen is an Analyst at Vcheck Global. She has an educational background in international relations, U.S. and Chinese foreign policy. Ms. Shen specializes in research in the Asia Pacific region. She is fluent in Mandarin.

Photo: Flickr/Bruce Harlick

Too often, due diligence begins and ends with databases. But while criminal and civil litigation searches, regulatory screenings, and sanctions checks are essential components of an investigation, they rarely tell the whole story. Searches of online and local media sources are crucial to developing a comprehensive profile on a subject, especially when operating in highly corrupt countries. A case Vcheck Global handled this year shows why.

In February 2019, a New York-based commercial real estate lender retained Vcheck Global to conduct a full-scope background investigation on a potential borrower—a Bangladeshi national. As part of the process to obtain a visa to enter the United States, the borrower had already passed an FBI criminal record check, but the investors sought a more comprehensive review.

Leveraging a local partner on the ground, Vcheck Global conducted a comprehensive Bengali-language media screen that revealed the borrower was deeply involved in corrupt, criminal activities—so involved that the local media had dubbed him the “healthcare mafia” of Bangladesh. Local Bengali-language news sources had reported extensively on his corrupt activities, which included repeatedly engaging in schemes to defraud the Bangladeshi Ministry of Health, procuring prostitutes for Ministry of Health officials in order to blackmail them, and hiding $32 million in offshore bank accounts to evade Bangladeshi taxes.

As an influential, wealthy, and well-connected businessman in a highly corrupt nation, the borrower avoided any legal action and passed the FBI’s record check without a problem. But our investigation—and our capability to conduct media checks in the local language—saved the client from a potentially costly mistake.

Ishan Sawai is an investigator at Vcheck Global LLC specializing in the Middle East and North Africa. Prior to joining Vcheck Global, he served as an intern in the Treasury Department’s Office of Foreign Assets Control, investigating sanctions evasion.

By Sun Shen

Like many other major economies, China has been operating in a global context and has seen a dramatic increase in inflow and outflow of funds in recent years. However, as it becomes more and more integrated into the global economy, the country is exposed to multinational money-laundering schemes. Despite recent measures by the Xi Jinping administration to monitor overseas transactions and crack down on money laundering, systematic vulnerabilities within China’s financial system and underdeveloped due diligence checks continue to facilitate global crimes.

China leads the world in illicit financial flows. The United States Department of State lists China among countries of primary concern of money laundering and financial crimes. Accordingly, criminal proceedings in China are laundered through purchase of real estate properties, art and gold, investment of illicit funds in lawful sectors, exploitation of third-party payment systems, and trade-based money laundering (TBML), such as trade misinvoicing. An article on New York Post estimated that $10 billion of China’s money is laundered every month.

The major source of illicit funds is likely from financial crimes and corruption, rather than drug or organized criminal gang activities. British Virgin Islands (“BVI”) has become a secret insider term for money laundering — wealthy Chinese individuals set up shell firms in offshore tax havens, claiming those companies generated part of their income while it may be from illegitimate sources. “White gloves”, on the other hand, refers to intermediaries who launder money for Chinese elites. British businessman Neil Heywood, for instance, used a BVI shell company and helped former high-ranking official Bo Xilai buy a French Riviera mansion worth of EUR 7 million and was caught up in the Chinese Communist Party’s huge political storm of bringing down Bo. Since corruption and bribery have gained recognition as being drivers of illicit financial flows, identifying politically exposed persons (PEP) becomes very important. Vcheck Global’s sanctions and watchlist screening help clients identify those who have heightened risks of corruption and associated crimes so that informed business decisions can be made. In-house Chinese-language analysts conduct these screenings to ensure comprehensiveness.

Another noteworthy aspect of money laundering in China is the challenges it poses to the real estate sector. Canada and Australia, in particular, are reportedly hotbeds of Chinese black money. The real estate sector is considered relatively lax in enforcing rules to catch money launderers – large sums of funds are required for purchase with less regulations in place makes real estate particularly vulnerable. In addition, ill-gotten money seeps into the sector through various means, including cash deposits, indirect payment via a third party, usage of “fake mortgage” to disguise funds, and successive selling. Vcheck Global conducts multijurisdictional due diligence checks to expose such potential risks. As the scale of financial crimes nowadays often expands across different countries, it is essential to choose the right background check products that offer comprehensive solutions for your business’s risk management.

Intelligence gathered from Investigative Due Diligence (“IDD”) can make or break a transaction. Before a typical partnership or M&A, clients will focus on several unique aspects in the due diligence process, but the three main categories are: Legal, Financial, and Investigative. Legal and Financial due diligence largely rely on documents and history provided by the target, followed by document-intensive validation. IDD does rely on records provided by the target, but focuses on intelligence gathered by investigative experts, which derive from public and proprietary sources independently. To intensify IDD, human source inquiries play a larger role. Source inquiries tend to disclose areas of potential risk that cannot be fully understood through public record research alone. Clients may choose to upgrade their IDD to include source inquires after public records showed negative or inconclusive findings. Discreet human source inquiries are often a critical, yet challenging piece of Deep-dive IDD.

Investigators leverage networks and contacts with familiarity of the target for information not in the public space. Depending on the target’s industry or jurisdiction, certain investigations may pose challenges, and privacy laws must be considered. Information gathered gives clients critical insight, and leads to further consideration or investigation based on the results of the IDD process.

Material issues uncovered include:
● Conflicts of interest
● Allegations of fraud of money laundering
● Financial issues, such as mismanagement of funds
● Regulatory breaches not in the public realm
● Potential self-dealing
● Questionable political relationships or corruption
● Undisclosed related-party transactions
● Other reputational risks

Human source intelligence can play an important role in an investor’s decision before the deal is final. These source inquiries provide color and context around the entity and key individuals. Based on information found, a client may focus more on certain aspects of their internal due diligence process, such as questioning a deal previously cleared. Successful investors will continue to undertake Deep Dive Investigations during the Due Diligence process to mitigate risk.

Increasing regulatory pressures and recent government enforcement actions call for increased knowledge about the entities firms do business with. Vcheck’s level II report, through its experienced investigators, covers deep dive investigations, including on-site visits, discreet source inquiries into business dealings, partnerships and overall reputation of individuals and companies. This allows our clients to obtain a complete picture of their subject. Highly recommended for high-risk partnerships and jurisdictions with limited information available in the public domain.

Brendan Binkoski
Brendan, a Certified Fraud Examiner and Certified Anti-money Laundering Specialist, has over 10 years of experience in investigations, including roles in AML compliance at a global Tier 1 bank, risk management for a leading investment advisor, intelligence analyst for a corporate investigations firm, and a fraud investigator for the Commonwealth of Massachusetts.

Vcheck Global helps you know more about the people and companies you do business with.

Last Monday, Spanish Judge Carmen Rodríguez-Medel found evidence that the new leader of Spain’s opposition party, the conservative Partido Popular (People’s Party, “PP”), Pablo Casado, received a master’s degree in regional public law from Universidad Rey Juan Carlos in 2009 under questionable circumstances. Earlier last week, a student at the university who had a file traced to Casado admitted that Casado did not attend class or submit the required papers for the degree. Furthermore, a former student, Alida Mas Taberner, admitted the university granted her a degree even though she also did not attend class or submit coursework. At the time, Tarberner was a deputy secretary in Valencia, which was then under PP rule. Casado admitted he did not attend class, as he already had a degree from Universidad Complutense, and many of his requirements were waived. The existence of the required papers he had to submit were also questioned. Casado insisted that the investigation into his academic degree was irrelevant and that he had no power to benefit the university politically in his previous capacity as a regional deputy. He now faces possible suspension or expulsion from PP, if found guilty.

Due to immunity laws for Spanish members of parliament, Rodríguez-Medel passed the case onto the Spanish Supreme Court. Spanish lower courts previously found signs of bribery in the conferral of several degrees from the university. In particular, the degree appeared to be given as a gift, rather than through academic merit. In April, Cristina Cifuentes, a PP regional premier from the Madrid region, resigned after claims she falsified her degree. Irregularities concerning her degree led to a criminal probe of forgery of public documents by university officials.
Several weeks earlier, Casados recently replaced former Spanish Prime Minister Mariano Rajoy as the leader of PP, which lost its hold over parliament in a no confidence vote held on June 1st. The vote was held after Spain’s Audiencia Nacional (National Court) ruled PP profited from an illegal kickbacks-for-contracts scheme known as the Gürtel case. The court reportedly confirmed the existence of an illegal accounting and financing structure that ran parallel to the party’s official structure, effectively establishing an institutional system of corruption in the public procurement process in Madrid, Valencia, and other parts of Spain. Estimates of the losses to public finances amounted to approximately 120 million Euros.

Partnering with a third party due diligence provider can help ensure your organization avoids affiliations with beneficiaries of bribery, corruption, and fraud. In addition to degree verification and a multi-lingual team of international investigators, Vcheck’s network of human intelligence can help provide our clients with the information they need to make informed decisions prior to entering relationships. Please reach out to [email protected] for additional information.

-Brock Treworgy

As businesses scan the social media profiles of both prospective and current employees, companies are increasingly turning to partnerships with screening providers to avoid undesirable associations and mitigate headline risk. Leveraging a third party with expertise in comprehensively scanning profiles can not only help businesses identify red flags, but it can also reveal employees divulging sensitive company information. Moreover, turning the responsibility over to a third party helps ensure employers avoid breach of privacy and discrimination claims that may arise if prospective applicants discover that employers visited their social media profiles prior to making a decision on their candidacies. In recent days, Major League Baseball (MLB) has dealt with controversy as discriminatory social media posts from several prominent players surfaced.

Josh Hader

During the 2018 MLB All-Star Game, several tweets from Milwaukee Brewers star reliever Josh Hader came to light while he pitched in front of a national audience. Several Twitter users reportedly found and started retweeting messages Hader had sent as a 17-year old. His messages included homophobic, misogynistic, and racist content. The MLB quickly ordered Hader to undergo sensitivity training. “There’s no excuse for what was said… I’m deeply sorry for what I’ve said and what’s been going on. That doesn’t reflect any of my beliefs now,” said Hader. When asked why he never deleted the tweets, Hader responded “No deletes… obviously, when you’re a kid, you just tweet what’s on your mind.” The incident proved to be an ugly episode during one of the sport’s marquee events.

Sean Newcomb

On July 29th, Sean Newcomb, a starting pitcher for the Atlanta Braves, apologized for offensive tweets discovered while he nearly pitched a no-hitter against the Los Angeles Dodgers. The messages, sent when Newcomb was a senior in high school, involved racist and homophobic content. Newcomb apologized, and the Braves quickly issued a statement acknowledging the hurtful and disappointing news. Similar to Hader, Newcomb mentioned he had forgotten about the tweets from his past. In addition, the MLB made an appointment for Newcomb to have a conversation with Oakland A’s General Manager Billy Beane, the league’s vice president for social responsibility and inclusion.

Trea Turner

Two days later, Washington Nationals shortstop Trea Turner issued an apology for recently discovered tweets from his past with homophobic and racist messages. Turner apologized for offending the African-American, LGBT, and special needs communities, and acknowledged that he should not have said the comments at all, which, similar to Hader and Newcomb, where sent when he was a teenager. “I think a lot of times it’s a tough thing to grapple with having something you said as a 17- or 18-year-old come back to haunt you a little bit later in life, and I think sometimes when you’re that age, you might know those things are wrong to say but maybe you don’t know anybody that’s been personally affected by them. It’s tough for you to really understand the damage, the real damage that they can and do cause,” said Turner. Turner’s teammate, reliever Sean Doolittle, responded “it’s not like you can accidentally post a slur,” and suggested that players delete posts that no longer represent who they are.

Prevention

At Vcheck, we routinely encounter evidence of discriminatory behaviors and tendencies through social media scans. Discovering red flags such as discriminatory, illegal, sexual, or violent conduct can help businesses avoid unsuitable hires and identify alarming behavior from their own employees. As these athletes have recently demonstrated, many tend to forget hurtful comments they have made in the past.

-Brock Treworgy

[email protected]

The United States Securities and Exchange Commission recently raised concerns about cryptocurrencies. Notably, in recent months, the SEC’s division of internal management sponsors to refrain from initiating registrations for funds investing in cryptocurrencies and related products, due to concerns about how such funds could comply with laws and regulations.

Fiduciary Duties

In particular, the internal management division noted the opportunity for fraud and manipulation in cryptocurrency markets. As such, the regulator has warned that broker-dealers and investment advisors should consider their fiduciary duties and the appropriateness of funds investing in cryptocurrencies and related products. SEC Chairman Jay Clayton outlined several questions for investors and other market participants, including, whether the product is legal/licensed, what risks are involved, and whether or not the product is in compliance. In addition, he cautioned that highly touted securities in thinly traded, volatile markets could be a red flag of a “pump and dump scheme.” Furthermore, the anonymity offered by cryptocurrencies and the capacity to make transfers without intermediaries or geographic locations may facilitate illicit trading and financial transactions. Several recent examples stand out as warnings to investors in this field.

Price Manipulation

In California, a type of cryptocurrency operating on a centralized blockchain model recently received its third class-action lawsuit for securities fraud and illegally trading securities. In California Superior Court, a private investor alleged the company and its Chief Executive Officer illegally profited from price increases and conflating their token supply, creating billions of tokens “out of thin air.” Defendants profitted by selling the tokens and using the cryptocurrency to fund themselves, according to plaintiffs.

Ukraine Exchange Fraud

Recently, Ukrainian Authorities arrested several individuals in connection with running multiple fraudulent cryptocurrency exchanges. The individuals reportedly used a custom content management system and infused review websites of these exchanges with fake, positive reviews to attract users. The suspects then used eWallets registered under fake identities to steal money from users. In Ukraine, and several other countries, cryptocurrencies are in a bit of a legal gray zone, and are neither explicitly legal or illegal.

Chinese Gambling Ring

Chinese Police arrested over 540 suspects involved in a cryptocurrency gambling ring in China during the 2018 World Cup. The ring, which involved more than USD 1.5 billion, implicated more than 20 gangs and 70 apps and websites. The platform reportedly supported gambling through the usage of Bitcoin, Ethereum, and Litecoin. Last September, then People’s Bank of China banned initial cryptocurrency offerings due to the large number of scams and its disruptive effect on the “economic and social order” of the country.

Ponzi Scheme in India

In India, authorities have accused a businessman of committing a cryptocurrency ponzi scheme, duping investors into believing their product was a safe investment with promises of high returns. His affiliates reportedly lured investors with promises of huge returns after six months and boasted they had connections with governments in several Caribbean companies. This would pave the way for their legalization in those jurisdictions. After time passed, investors realized they were not getting a return on their investment, and those that attempted to go to the company’s headquarters were turned back or even threatened. Several other scams have been uncovered in India in recent months, including a kidnapping scheme extorting bitcoins and other ponzi schemes.

Moving Forward

While efficient and conducive to facilitating investment opportunities, cryptocurrencies present a substantial amount of risk and a significant amount of legal uncertainty, particularly internationally. When advising clients and engaging in transactions, advisers should thoroughly examine laws and regulations, in addition to the suitability of these opportunities for their clients. Partnering with a third party due diligence provider such as Vcheck Global can help companies and institutions protect themselves and their clients from involvement with bad actors across the field. Thoroughly vetting companies, their affiliates, and key actors can include not only reviews of sanctions lists, in-country public records and native language research, but higher level investigations which can involve in-country source inquiries and surveillance in the appropriate jurisdictions.

Brock Treworgy

According to a Peruvian investigative journalism news source, more than USD 2.2 billion linked to suspected criminal activities has entered Peru’s financial system since 1998 through clients with alleged ties to corruption, drug trafficking, illegal gold mining, and tax evasion. Two of the country’s largest banks reportedly did no respond to questions regarding their client acceptance process, referring to financial secrecy laws. Peru’s Financial Intelligence Unit, La Unidad de Inteligencia Financiera, (UIF) showed a list of banking clients with checkered pasts, and included individuals and companies including on United States sanctions and watchlists.

The investigation revealed inaction by Peru’s oversight entity of insurance and pension funds, La Superintendencia de Banca, Seguros y AFP (SBS) and brought to light instances of noncompliance with regulations intended to prevent money laundering. Recently, Americn and European governments and regulatory entities have filed criminal charges or sanctions, in some cases, for billions of dollars against banks associatied with money laundering or failing to comply with regulations. While the Peruvian government has passed legislation giving the SBS authority to fine institutions for banking irregularities, in order to prevent money laundering, the highest fines pale in comparison to other countries and international regulatory agencies.

Acording to the investigation, the cases revealed major Peruvian banks ran operations which revealed deficiencies in their anti-money laundering systems, particularly, failing to take into account high-risk customer status and address ties to criminal groups. An analysis of client profiles and suspicious acitivities revealed Latin American drug trafficking figures, who purportedly laundered their gaines through real estate, transportation, and currency exchange businesses in Lima.

One other deficiency identified in Peruvian banks was the failure to file suspicious activity reports in required fashion. According to the investigation, there were hundreds of cases in which Peruvian banks notified the UIF of suspicious activitiy well after the required deadline of 30 days, with the average delay lasting four months, and in some cases, lasting as long as five years. In addition, Peruvian banks reportedly demonstrated a tendency to warn their clients and gave them the opportunity to explain themselves after irregularities were detected. Some of these individuals moved significant sums despite no employment or financial history and resided in poor neighborhoods or informal settlements.

Finally, the failure of institutions to conduct appropriate due diligence on not just its customers, but its employees stood out as a significant problem. Analysis revealed employees from high-risk regions were hired, some of them maintaining ties to organized crime. It is important for all financial institutions to scrutinize hires entering sensitive positions, particularly given the capability of some criminal syndicates to penetrate the financial system.

Brock Treworgy

Data, technology and automation have transformed the modern compliance program during a time in which financial institutions are confronted with greater complexity than before. Emerging risk categories, including narrative sanctions, beneficial ownership, and crypto currencies, and fintechs present financial institutions with increasingly difficult challenges to confront.

Narrative Sanctions

Historically, government sanction bodies provided the industry with a set list of individual names and entities to be embargoed from doing business. In the last fifteen years, this has changed, so that sanction bodies now also describe the types of individuals they want screened, putting a huge burden on financial institutions to identity who the individuals and entities covered by these sanctions are, including layers of subsidiaries, and beneficial owners. In this day and age, as companies find it is not sufficient to search by the letter of the sanction, increasingly, they are turning to third party vendors to help them in helping them meet their compliance necessities and protect their businesses from bad actors.

Identifiying what your business is and is not capable of doing should be one of the first steps in establishing a successful compliance program. Staying up to date on industry trends, and the constantly changing political landscape is one strategy that can be effectively used in order to ensure your firm is aware of any new risks and potential partnerships and tools to mitigate them.

Businesses face both regulatory and reputational risk in ensuring they avoid finding themselves as a party to money laundering, organized crime, or terrorist activities. Not only do companies find themselves subject to potential fines and punishment from regulatory authorities, but once an industry reputation for involvement with bad actors is established, it can be difficult to change.

Beneficial Ownership

Governments have recently learned how easily bad actors have been able to set up shell companies and hide ownership, which became evident after the release of the Panama Papers. Unfortunately, in this day and age, this information can change both quickly and significantly, with activities occuring in a complex web of companies scattered across multiple jurisdictions. Furthermore, due to new beneficial ownership requirements, the number of individuals and entities that must be screened increases. As most institutions have restrictions on their time and budget, determining an effective risk mitigation strategy is crucial, and partnering with a third party may be the fastest and most efficient one.

Cryptocurrencies

Over the last year, cryptocurrencies have presented another challenge to many businesses seeking compliance. Due to the rocketing valuations of many of the established cryptocurrencies, their anonymity, their susceptibility to money laundering, and the large influx of customers, there has been increasing scrutiny of the use of cryptocurrencies by regulatory authorities. While certain cryptocurriences obfuscate ownership and transaction activity, increasing their risk, others provide useful insight that demonstrates the lower risk profiles of other users. Banks should, again, stay as informed as possible on breaking trends in the cryptocurrency market in order to protect both themselves and their customer from scams and hacks. A defined plan, and potentially working with a consultancy, could be an effective strategy to grow your business into this new space. Researching the history of the individuals involved with the crypocurrencies, including any previous criminal history or fraud allegations, is also recommened.

Brock Treworgy

VCheck Global, a leading provider of business to business due diligence background checks, has launched its new application to utilize advanced AI to scan social media data. The Company is offering this solution for corporate clients and financial institutions to gather and review an individual’s entire online identity which will generate an easy to read report based upon pre-set criteria chosen by the client.to help determine how well a potential employee or business partner may fit into the organizational framework. Vcheck Global clients will be able to customize the category of “social media red flags” for which they want to screen.

The need for a social media screening product is a long overdue tool and service that will compliment and add value to Vcheck Global’s existing core business of domestic and international corporate due diligence services. When paired with Vcheck Global’s full scope of investigative services, the client will be provided with a more robust view of the individual under consideration. Corporate clients who process high volumes of background check and corporate due diligence services recognize that in today’s online world, a deeper dive into a prospective candidate or business partner must include an overview of social media and web content.

Lyndee Fletcher, COO of Vcheck Global stated, “It is important to note that only publicly available data is considered in the social media review process. Our objective is to deliver maximum value to our clients and to provide highest level of comfort that our methodology is secure and compliant”.

ABOUT VCHECK GLOBAL

Vcheck Global is a business-to-business provider of due diligence, background checks, employment screening, document retrieval, and specialized research of both business entities and individuals. Vcheck Global offers over 275 due diligence and background check services including custom investigations, international services, and rush processing. Vcheck Global protects its clients by providing essential information about the people and companies they do business with.

For more information regarding Vcheck Global, please contact us at [email protected], visit https://vcheckglobal.com or call (888) 740-0747.

On Wednesday, numerous mainstream media sources reported French businessman Vincent Bolloré, Chairman and CEO of the investment group Bolloré, was charged by French investigators as part of a probe into the possible use of bribery in two African nations in order to obtain port contracts from public officials. Specifically, the investigation concentrates on suspicion of wrongdoing in the award of contracts to Bolloré S.A. to operate container terminals in Lome, Togo, and Conakary Guinea.

Bolloré’s business holdings include the global advertising agency Havas, a controlling stake in French media conglomerate Havas, and rail and port companies in Africa. Bolloré, who has built relationships with politicians and well-connected businessman in Africa Europe, has, in the past, combated scrutiny of its operations by filing litigation against journalists investigating his relationships.

Investigators from France’s financial crimes unit examined one of Havas’ subsidiaries helped facilitate the elections of the presidents of Togo (Faure Gnassingbe) and Guinea (Alpha Conde), notably, by underbilling them for advertising work. The investigation reportedly began after a tip from a former employee to law enforcement.

The investigation comes at a time when French authorities are increasing their prosecution of corruption. The judges in the case, Aude Buresi, and Serg Tournaire, are also investigating former French president Nicolas Sarkozy over allegations that former Libyan dictator Muammer Gadaffi donated €50 million to his 2007 presidential campaign. In addition authorities are probing Societe Generale S.A. over allegations of bribery related to the bank’s work with the Libyan Investment Authority.

As governments and international anti-corruption authorities globally are increasingly ramping up the investigation of bribery, money laundering, fraud, and other financial crimes, companies, fortunately, have options for business intelligence and risk mitigation. Partnering with Vcheck, a global investigations firm, can help ensure your business needs are met. This includes satisfactorily meeting domestic and international compliance regulations, identifying and avoiding troublesome business relationships, and researching investment opportunities.

Please reach out to Vcheck’s team at [email protected] with any questions on how your needs can be addressed.

–Brock Treworgy

Washington D.C., April 16, 2018 —

The Securities and Exchange Commission today unveiled a public service announcement (PSA) to encourage investors to check the background of their investment professional by using the free search tool on Investor.gov before investing. Investor.gov, the SEC’s website dedicated to individual investors, provides investors with tools and resources to help them invest wisely and avoid fraud.

“Investor education is an important line of defense against fraud and is critical to our efforts to both protect Main Street investors and improve their financial decision making,” said SEC Chairman Jay Clayton. “Through public service announcements, investor alerts and bulletins, and direct outreach, the SEC will continue to focus on empowering investors.”

“It can be hard to spot a fraudster, and Investor.gov’s free search tools can help investors verify that they are dealing with a registered investment professional,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy. “Investors who check the background of their investment professional and use the other tools and resources available on Investor.gov can make more informed investment choices – and better protect themselves from fraud.”

The PSA’s storyline involves a couple seeking advice from an alleged investment professional who turns out to be a fraud. At first, the investment professional seems genuine, but as the conversation continues his fraudulent scheme quickly unravels. He uses high-pressure sales tactics – typically a red flag of fraud – to persuade the couple to invest, with statements such as:

•You are definitely getting in at the perfect time

•This investment opportunity will not last long

•I can guarantee that your money will double

•There’s absolutely no risk to you

The SEC’s latest PSAs encourage investors to check the background of their investment professional.

The PSA stresses that most fraudsters are not this easy to spot and encourages investors to visit Investor.gov before investing.

The PSAs are in video and audio format. Additional information on the PSAs can be found here.

More than 9 million new users have used Investor.gov since it launched in October 2009. The SEC expanded its outreach program in 2016 to include PSAs to reach and educate more investors. Since that time, the traffic on Investor.gov has increased by 86 percent.

Vcheck Global helps you know more about the people and companies you do business with.

On Thursday, Reuters reported the European Union extended sanctions for one year on Iran over human rights violations, after debating whether to impose a new set of penalties in an attempt to preserve the Joint Comprehensive Plan of Action agreement signed between the P5+1 countries (China, France, Germany, Russia, the United Kingdom, and the United States) and Iran in October 2015. United States President Donald Trump, an opponent of the deal, has given a May 12th deadline to renegotiate the arrangement, or else the United States will not extend sanctions relief.

Divided Camps

Europe is reportedly divided on how to best safeguard the deal. France, on the one hand, has pushed for new sanctions over Iran’s ballistic missile program, and Iran’s greater involvement in the Middle East. This includes in Syria, where Iran supports Syrian President Bashar al-Assad, Hezbollah in Lebanon, and a Houthi insurgency against the Yemeni military. Italy, on the other hand, fears any renegotiation would upset Tehran, and endanger European investments in the country after decades of international isolation. According to Rome, any new punitive measures would not necessarily prevent President Trump from leaving the agreement.

Next Steps

The European Union member state’s foreign affairs ministers must reach a unanimous agreement over a newer set of penalties. Germany and the United Kingdom reportedly support France, whereas Austria and Spain back Italy. Last month, London, Rome and Paris proposed targeting Iranian militias and commanders in building on the Union’s existing sanctions related to Syria, which includes travel bans and asset freezes on people, and a ban on doing business there. The current human rights sanctions, set to expire in April 2019, include asset freezes and travel bans against 82 people and one entity, as well as a prohibition of exports of equipment that could be used for internal repression and monitoring telecommunications. In March, Iran arrested activists and political opponents, as well as allegedly used torture to coerce confessions.

Compliance with Sanctions

Complying with United States Office of Foreign Asset Control and European Union Sanctions are critical for entities and institutions seeking to avoid liability. Any institution engaging in international business in large volumes, or conducting business with moderate to high risk individuals should consider partnering with Vcheck Global to ensure your business is fully compliant and has done its appropriate due diligence on its customers and partners. Also included on the Sanctions list are:

The Balkans
Belarus
Burundi
Central African Republic
Cuba
Democratic Republic of the Congo
Iraq
Lebanon
Libya
North Korea
Russia
Somalia
Sudan
Syria
Venezuela
Yemen
Zimbabwe

-Brock Treworgy

Please reach out to Vcheck’s team at [email protected] with any questions on how your needs can be addressed.

According to The Washington Post, investigators have uncovered evidence of a multi-billion dollar corruption scheme which helped Iran evade sanctions for more than a decade. Iran is currently subject to United States Office of Foreign Assets Control (OFAC) sanctions for conducting destabilizing activites in the Middle East, including (but not limited to) the funding and training of terrorist groups, human rights abuses, and attempts to subvert internationally recognized governments. The sanctions, in particular, target individuals or entities that materially contribute to the Government of Iran with respect to its arms or ballistic missile program.

Future Bank

According to a Bahraini government audit, Bahrain-based Future Bank, a joint venture partly owned by two of Iran’s largest lenders, Bank Saderat Iran, and Bank Melli Iran, secretly helped Iran evade sanctions for more than a decade, and frequently altered financial documents to hide illict trade between Iran and dozens of foreign partners. FutureBank, aloong with all of its branches worldwide, was previously listed on the Specifically Designated Nationals list maintained by OFAC in March 2008, before it was removed as part of the Joint Comprehensive Plan of Action Agreement. The entity was still identified as part of the Government of Iran, prohibiting transactions with U.S. entities. Bank Saderat Iran and Bank Melli Iran had previously been accused by U.S. officials of helping finance Iran’s nuclear program and its international terrorism network.

The Scheme

The bank reportedly concealed at least USD 7 billion worth of transactions between 2004 and 2015, a time when many Iranian banks were barred by not just OFAC Sanctions, but by the European Union, for Iran’s nuclear activities. Auditors discovered hundreds of bank accounts tied to individuals convicted of crimes including money laundering and terrorist financing, as well as phantom loans provided to companies that operate as fronts for Iran’s Islamic Revolutionary Guard Corps, according to filings in the Permanent Court of Arbitration in The Hague. One of the evasion techniques used, “wire-stripping” involved the removal or changing of identifiying information when transferring money between banks, in order to conceal Iran’s involvement. In short, the bank allowed Iran to buy and sell billions of dollars worth of goods in defiance of international sanctions intended to punish Tehran over its nuclear program and support for terrorist groups.

Reaction

According to Bahraini Foreign Minister Khalin bin Ahmed al-Khalifa, criminal proceedings were being pursued in the country, and the results of the investigation would be shared with other countries. In recent years, the Bahraini government has accused Iran of inciting violence against the country’s monarchy. In particular Bahraini officials criticized Future Bank for allowing a Shiite cleric tied to opposition movements in Bahrain, Isa Qassim, to make millions of dollars of cash deposits over several years. According to several Bahraini officials, he directed some of that money to a charity allegedly linked to terrorism, a technique commonly used in terrorist financing, and is difficult to prove.

-Brock Treworgy

In order to better serve growing client demand in the region, Vcheck is proud to announce the launch of its Latin America platform, which includes an expanding suite of services in the investigative due diligence space.

Professional Expertise

Vcheck’s offerings in the Latin America region are enhanced by the talent of our expanding team, which includes experienced professionals who are native and bilingual speakers of Spanish and Portuguese. Foreign news media coverage, government sanctions, watchlist screening, and regulatory record examination are now available throughout the region. Furthermore, our team is available to provide litigation support for our clients in need of assistance reviewing complex foreign litigation.

Regional Coverage

Vcheck’s capabilities in the Latin America region have been expanded in all jurisdictions, and we are proud to announce this platform as a core component of the company moving forward. All countries in the region, including Argentina, Brazil, Colombia, and Mexico now have a full range of available investigative due diligence products. In addition, customizable scoping requests and targeted searches tailor-made for our clients complement our newly-enhanced reports. Whether an important business acquisition is at stake or an individual’s background needs to be verified for employment, Vcheck is ready to meet your needs.

Source Inquiries

Included in the launch of Vcheck’s Latin America platform is an established network of investigators on the ground, experienced professionals who are in tune with the legal and political climate of the region and can navigate its bureaucracies. This allows Vcheck to gain vital business intelligence and allows our clients to evaluate risks based on a more complete picture of their subjects. On-site visits and discreet inquiries into business dealings, partnerships, and reputations of companies and individuals provides clients with our highest level of due diligence.
Please reach out to [email protected] with any questions or requests.

–Brock Treworgy

The “Three Lines of Defense” is a widely used phrase for describing how organizations should manage their anti-money laundering (“AML”) risk. As the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) regulations has applicability outside U.S. borders, all individuals and entities are required to comply when conducting transactions in U.S. dollars. OFAC requires that institutions must block the accounts and property of specified countries, entities, and individuals. Furthermore, it prohibits the rejecting of unlicensed business with sanctions countries, entities, and people.

The Five Pillars

Four pillars of an AML/Counter-Terrorist Financing (“CFT”) program include a system of internal policies, procedures and controls (the first line of defense), a designated compliance function with a compliance officer (the second line of defense), an independent audit function to test the overall effectiveness of the AML program (the third line of defense), and an ongoing employee training program. The fifth pillar, established by the Financial Crimes Enforcement Network in 2016, requires appropriate risk-based procedures for conducting ongoing customer due diligence. These procedures include understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile, conducting ongoing monitoring to identify and report suspicious transactions, and maintaining and updating customer information.

The First Line of Defense

Policies and procedures should be specified in writing and communicated to all personnel in order to keep organizations in compliance with regulations. Guidelines should be clearly established for detecting and reporting suspicious activity. Customer-facing staff need the deepest practical understanding of AML/CFT efforts, and need to know how to handle cash transactions and establish loans and accounts while complying with regulatory requirements. Operations personnel should not be overlooked in the training process, as they are often in position to recognize illegal activities.

The Second Line of Defense

A designated compliance officer should oversee the coordination and monitoring of the organizations compliance program, and hold responsibility for reporting suspicious transactions. Advanced, ongoing training is recommended in order to stay on top of requirements and emerging trends. This includes attending conferences and industry training events. The compliance officer’s duties should be kept separate from business line responsibilities in order to avoid conflicts of interest, and they should have a direct line of contact to senior management.

The Third Line of Defense

Independent testing staff is required in order to maintain the third line of defense. This staff should receive its own training and act apart from the rest of the organization in assessing the adequacy of the AML/CFT compliance program, the effectiveness of its procedures, and compliance oversight and training. It is senior management’s responsibility to ensure audit functions are designated to qualified staff.

Complying with OFAC

The board of directors has responsibility for an organization’s AML/CFT compliance program. Leadership must actively support and understand compliance efforts, and seek to manage and mitigate any deficiencies identified. Adequate resources must be devoted to the compliance function, and ensuring an independent, competent party tests the program is one way to assess effectiveness.

Partnering with a third party due diligence provider is a proven way of ensuring comprehensive compliance with strict OFAC regulations. The first line of defense is responsible for onboarding customers, and assessing their source of wealth, account activity, and ownership structure. It is vital that these customers are vetted in order to prevent exposure and risk of processing a transaction on behalf of a sanctioned interest. Business activities, political ties, and geographic exposure can all be investigated as part of this process.

Vcheck Global helps you know more about the people and companies you do business with.

-Brock Treworgy

On February 21^st, Transparency International released its Corruption Perceptions Index, which listed numerous Latin American and Caribbean countries among the world’s most corrupt. According to Transparency International’s survey, 62% said corruption had risen in the previous year, more than half said their government is failing to address corruption, and nearly a third said they had to pay a bribe in order to use a public service.

Central America

The Central American countries of El Salvador, Guatemala, Honduras, and Mexico all ranked poorly in the latest index, with more than half of Mexico’s population saying they had to pay a bribe in order to use public services. Little faith resides with public institutions, such as the government and police. Despite the presence of organizations such as the International Commission Against Impunity in Guatemala, and the Support Mission Against Corruption and Impuinity in Honduras, corrupt forces in these jurisdictions remain entrenched. Citizens in these countries have recently protested government efforts to roll back anti-corruption campaigns, and hold their politicians accountable.

Brazil

In recent years, Brazil has suffered from budget cuts, increasing crime, and corruption scandals. Recently, tapes of Brazilian President Michael Temer encouraging bribes leaked to the public, leading to widespread public outrage. His predecessor, President Dilma Rousseff, was forced to resign after the country endured two massive corruption scandals involving Petrobras, Brazil’s state-owned oil entity, and Odebrecht, a Brazilian construction conglomerate. These bribery schemes undermined the integrity of bidding processes and public confidence in their government. In recent days, the Brazilian government has sought to militarize crime fighting efforts, beginning with Rio de Janeiro, while critics argue militarization does not address the systemic factors of what drives crime, and it risks further corruption amongst the troops.

Venezuela

Venezuela, which has held the distinction of the most corrupt country in Latin America since 2014, shows signs of deteriorating even further as it confronts plunging oil prices and critical food shortages. Venezuela’s President, Nicolás Maduro, expanded his powers last summer, electing a new law-making body that replaced the existing opposition-controlled legislature. Numerous oil industry executives have been arrested, and over thirty judges were forced to flee the country, setting up a “Supreme Court in Exile.” To make matters worse, allegations persist that Maduro has cooperated with terrorist groups such as Hezbollah, Bashar Al-Assad’s regime in Syra, and OFAC-sanctioned governments, such as Cuba and Iran.

Managing Risk

How can businesses effectively manage their risks in conducting business in Latin America? Partnering with a third party due diligence provider can ensure your company identifies concerning personal history, regulatory enforcement measures, ongoing litigation, and illicit activities. Due to the high risk nature of many Latin American countries, performing enhanced due diligence can not only help your company comply with AML, FATCA, FCPA, PATRIOT Act, and UK Bribery Act regulations, but it can help ascertain the overall reputational profiles of individuals and organizations, both positive and negative.

Vcheck Global helps you know more about the people and companies you do business with.

-Brock Treworgy

In May 2016, The United States Department of the Treasury’s Financial Crimes Enforcement Network issued its final rule on Customer Due Diligence Requirements for Financial Institutions. This rule requires institutions to establish and maintain written procedures to identify and verify the identity of the beneficial owners of all legal entity customers. These institutions include depository institutions, securities broker-dealers, mutual funds, and future commission merchants. This adds customer due diligence as the fifth pillar alongside the other four pillars of money laundering 1) development of internal policies, procedures, and related controls 2) designation of a compliance officer 3) thorough and ongoing training and 4) independent review for compliance.

Key Elements of the New CDD Rule

The new rule requires verifying the identity of customers, and beneficial owners, including not only those with a 25% or more equity interest of legal entity customers (the Ownership Prong), but also at least one individual form the “Control Prong,” or those with significant responsibility to control, direct, or manage the entity. These include CEOs, CFOs, COOs, General Partners, Presidents, Managing Members, Treasurers, and Vice Presidents. In addition, the rule also requires understanding the nature and purpose of customer relationships, conducting ongoing monitoring to maintain and update customer information, and to identify and report suspicious transactions. This rule applies to all accounts, including checking, savings, certificates, and loans. Non-governmental organizations, including charities and religious organizations, only need to list one person from the control prong.

What Entities are Covered?

The legal entity customers include the following: business trusts, corporations, general partnerships, limited liability companies, limited partnerships, entities created by a filing with a state office, and similar entities formed under the laws of a non-US jurisdiction.

Why is the Purpose of this Regulatory Action?

The failure to identify beneficial ownership allows criminals and others looking to hide illicit proceeds to gain access to the financial system anonymously. The new rules on customer due diligence will assist law enforcement and investigators to help prevent the evasion of targeted financial sanctions, improve the ability of financial institutions to assess risk, and facilitate taxation compliance.

How can you Prepare?

Financial institutions will be required to have written procedures to identify and verify beneficial owners after May 11, 2018. Identification can be accomplished by gathering personal identify information on forms provided by the Financial Crimes Enforcement Network. Businesses should take the next several months to enhance their due diligence practices and review their risk assessment and anti-money laundering methodologies, including suspicious activity monitoring, and on-boarding processes. Companies such as Vcheck can help conduct verification, identify ownership structures, and detect any red flags and risks involved with certain subjects. Partnering with Vcheck allows financial institutions to assess and mitigate risk, facilitate reporting requirements, including supporting taxation compliance, and to identify the assets and accounts of bad actors, including criminals and national security threats.

Vcheck Global helps you know more about the people and companies you do business with.

-Brock Treworgy

There are many signs your company is dealing with a potentially dishonest employee. Internal audit departments and supervisors can track the performance of company employees, but competence and honesty do not always go hand in hand. Internal controls and strict documentation can help prevent fraud and theft, but dishonest employees often find vulnerabilities they can exploit. There are several ways to identify and confront employees suspected of misconduct in the workplace, and it is critical for employers to make use of these techniques in order to prevent fraud, theft, and wrongdoing.

Identifying the employee

Missing or edited journal entries, sudden changes in work habits or behavior, refusal to take vacation, and employees making unexpected, large purchases, are red flags of misconduct. Body language is another common indicator of malfeasance. An employee that is inconsistent or uncomfortable in talking about their duties and performance, has trouble talking about their prior work experience, or has difficulties maintaining eye contact when asked probing questions should be identified and monitored. People experiencing heightened emotions typically fidget, lick their lips, and look either red, flushed or pale.

Approaching the employee

Approaching an employee suspected of dishonest conduct can be a volatile situation. Interviewing by surprise is the best tactic for disarming the person. Objections such as “I don’t have enough time” or “I am not ready” should be met with responses such as “this will be quick” or “this will be informal and I am simply gathering information.” In these interviews, individuals typically react rather than think.

During the interview, it is important to pay attention to verbal cues such as changes in speech patterns, timing of responses, fragmented or incomplete sentences, and making excuses. Deceptive subjects might experience a change in voice pitch as their vocal chords become tense, and may require additional time to answer a simple question in their attempt to contrive a false answer. Nonverbally, interviewers should pay attention to the subject’s physical signs of deception, including crossing of the arms or legs, covering their mouth with their hands, or changing their posture as if moving away from the interviewer in a “fleeing position.”

After obtaining evidence and there is a reasonable chance the subject commited wrongdoing, the interviewer should seek to obtain a written admission of guilt. This should only be conducted after all other investigative steps have been taken. As people rarely confess voluntarily, or if they believe the accuser doubts their guilt, the interviewer should present the evidence piece by piece, and ask for “comments.” An innocent person will not accept the premise of the question. The dishonest individual will often become quiet or offer weak denials. The interviewer should then seek to “establish a rationalization” for the dishonest action such as financial or family problems, or making it seem like a minor infraction in order to obtain the confession. People will rarely admit to wrongdoing if they are made to seem like a bad person.

Prevention

Maintenance of a strong internal audit program and internal controls and procedures is criticial to preventing fraud and theft. Employees prone to committing wrongdoing are not only more likely to do so if they sense weaknesses in internal fraud detection, but individuals with no prior criminal history will be tempted as well. All companies should have an anonymous company hotline dedicated to handling internal tips about dishonest practices. Employee tips are the most common way internal fraud and theft is identified, followed by internal audit, management review, and lastly, accidental discovery.

During the hiring process, it is important to watch out for warning signs of dishonest employees. Lying or stretching the truth is a common problem during the hiring process, and employers should seek to corroborate applicants resume claims by both challenging them during the interview phase, and during their first few months of employment. Background checks should always be ordered on all new employees, but particularly on any employees involved with handling company finances. Internal candidates eligible for increased responsibilities and should also be considered.

Brock Treworgy

How can Money Laundering Affect your Business?

In 2018, anti-money laundering (“AML”) regulations and enforcement measures are reaching new heights across the globe. While some countries, such as Colombia, are rife with illicit profits from criminal enterprises, they have also made strides in recent years strengthening their AML and terrorist financing programs. Other nations, however, facilitate money laundering through weak AML legislation, corruption, and lack of transparency surrounding financial flows. Money laundering undermines the integrity of a business, and the financial sector as a whole.

Institutions can become complicit in criminal enterprises, leading to damaging scrutiny from regulatory authorities, customers, and other businesses. Countries rampant with money laundering have witnessed entire industries overtaken by organized crime, leading to increased levels of bribery, corruption and criminal activity in their societies.

How is money laundering accomplished?

Initially, illegal profits are placed into the financial system, such as through monetary instruments or small deposits. Second, the launderer engages in a series of movement of the funds to distance, or, “layer” them away from the source. Finally, the funds are integrated back into the economy, such as by investing them in real estate or business ventures.

In this day and age, as technology increases exponentially, so too does the potential for money laundering. Methods include laundering through electronic transfer of funds, private banking, money remitters and money exchange houses, insurance companies, and securities broker-dealers. Alternatively, launderers also use casinos, travel agencies, and vehicle sellers to hide illicit gains. Shell companies and trusts are commonly used to mask beneficial ownership, many of which are located offshore.

Which regions should I be most concerned with?

Of the United States Department of State’s 2017 list of 88 countries of primary money laundering concern, 37 of these countries are located in Latin America. In addition, other noteworthy countries on the list include Canada, India, Portugal, Russia, Spain, Turkey, Ukraine, the U.A.E, and the United Kingdom.

Uncovering complex money laundering schemes requires professional assistance. Vcheck Global’s team not only includes investigators with expertise in financial investigations, but those who specialize in anti-money laundering investigations, particularly across foreign jurisdictions. This allows Vcheck Global to best serve our clients across a variety of sectors, including financial institutions and law firms. Vcheck Global helps you know more about the people and companies you do business with.

Brock Treworgy

Recent changes in state cannabis legislation has resulted in yet another California gold rush. Creative investors have started pouring money into ‘legal’ grow operations. Federal lawmakers are rattling their sabers. Eager customers are crashing the ticket booth. News pundits sit in the grandstands with their beer and hot dogs cheering the opposing sides.

Money, marijuana, new tax opportunities…the Greenest Show On Earth is just getting started.

The winner is anyone’s guess!
Although the details of permits, legislation, taxation, and zoning are not yet finalized, one thing is certain. Everyone agrees that owners of legal cannabis operations should not be serious criminals, nor should they represent those that are involved in selling or manufacturing illicit drugs.

California has already drafted cannabis legislation, yet the word ‘felon’ rarely appears. The state appears to be more interested in taxation, THC levels, and money flow rather than the reputation of the people at the top who will control the product.

So how does one assure that the bad guys stay out of the legal cannabis market?

Vcheck Global, an industry leader in due diligence background checks, already works with commercial lenders that finance medicinal marijuana operations in Canada and other legal jurisdictions. Our research has uncovered irregularities such as criminals posing as distant ‘investors’ who have placed straw owners to do their bidding.

Determining the reputation and history of business owners is one of the crucial factors in a commercial lender’s decision. If a business is shut down or the owner is arrested and convicted, the ability to recoup the investment is significantly reduced. It’s all about risk management and protecting collateral.

Opportunities exist in the cannabis market, and Vcheck Global will help you recognize what’s behind the curtain of business management and expose the reputation of those in control.

What Are Discreet Interviews?

How Are They Different from Reference Checks?

Why Are They Valuable?

Most Common Uses of Discreet Interviews:

Discreet Interview Process:

Summary:

3 Game-Changing Factors when Conducting Discreet Interviews

1. Interview Approach & Data Integrity

2. Quality of Sources

3. Number of Sources

The Power of Discreet Interviews – Examples:

Example 1:

Example 2:

Conclusion

Avoiding Shareholder Lawsuits

Other Risks of Inadequate Due Diligence

Conclusion

Ensuring Accuracy in Complex Analyses

Four Common Mistakes

1. Romanization by Country

2. Identifying all Possible Variations of Regulatory Risk

3. Omitted Vowels

4. Transliteration vs Translation

Enhancing the Integrity of Global Communications

Creditworthiness & Red-Flags

Litigation History

Regulatory and Reputational Risk

Context is Key:

Financial Health

Reputation

Qualifications

Proceeding with Confidence

Sources:

https://www.icij.org/investigations/fincen-files/global-banks-defy-u-s-crackdowns-by-serving-oligarchs-criminals-and-terrorists/

https://www.fincen.gov/sites/default/files/2020-08/FinCEN%20Guidance%20CDD%20508%20FINAL_2.pdf

https://www.law.cornell.edu/cfr/text/31/1020.210

https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200821a1.pdf

https://www2.deloitte.com/content/dam/Deloitte/in/Documents/finance/Forensic/in-forensic-AML-Survey-report-2020-noexp.pdf

Sources:

https://home.treasury.gov/system/files/126/framework_ofac_cc.pdf

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20200127

https://home.treasury.gov/system/files/126/05142020_global_advisory_v1.pdf

https://www.law.com/newyorklawjournal/2020/06/03/active-u-s-enforcement-of-anti-money-laundering-rules-continues-unabated/?slreturn=20200518125604

https://www.fdic.gov/regulations/laws/rules/2000-8700.html

Sources:

Transparency International’s Corruption Perceptions Index 2018Billions in Illicit Cash Reportedly Entered Peru’s Financial SystemLatin America Struggles in its Fight Against Corruption

Sources:

Alghamdi, Hamdah; Petraki, Eleni. 2018. “Arabizi in Saudi Arabia: A Deviant Form of Language or Simply a Form of Expression?” Soc. Sci. 7, no. 9: 155.

Yaghan, Mohammad Ali. ““Arabizi”: A contemporary style of Arabic Slang.” Design Issues 24, no. 2 (2008): 39-52.

Photo: Flickr/Bruce Harlick

Fiduciary Duties

Price Manipulation

Ukraine Exchange Fraud

Chinese Gambling Ring

Ponzi Scheme in India

Moving Forward

Brock Treworgy

Narrative Sanctions

Beneficial Ownership

Cryptocurrencies

Divided Camps

Next Steps

Compliance with Sanctions

Future Bank

The Scheme

Reaction

Professional Expertise

Regional Coverage

Source Inquiries

The Five Pillars

The First Line of Defense

The Second Line of Defense

The Third Line of Defense

Complying with OFAC

Vcheck Global helps you know more about the people and companies you do business with.

Central America

Brazil

Venezuela

Managing Risk

Vcheck Global helps you know more about the people and companies you do business with.

Transparency International’s Corruption Perceptions Index 2018
Billions in Illicit Cash Reportedly Entered Peru’s Financial System
Latin America Struggles in its Fight Against Corruption

`Sources:`