Conducting Investigative Due Diligence in the Developing World

Investigative due diligence is the process of identifying hidden or undisclosed information related to a company or individual that is involved in a potential investment, acquisition or business relationship. This type of proactive commercial investigation looks to identify the areas of concern that may not be reflected in a company’s financial or legal due diligence such as intangibles like the company’s reputation and that of its senior principals, as well as potential red flags or areas of concern in their backgrounds. The investigations are often invaluable in their ability to provide points of negotiation or information that could avoid a costly commitment being made.

Investigative due diligence is an essential step pre-ipo due diligence for anyone conducting business in the emerging or developing markets. This is particularly important for any US or European companies with respect to the requirements of anti-corruption acts such as the FCPA and UK Bribery Act.

Asia Diligence is a company with its operation base in South East Asia that has on the ground experience of conducting due diligence investigations and background checks in over 90 countries throughout the world. Asia Diligence has managed over one thousand of these investigations primarily in emerging and developing countries and offers some insight into conducting these investigations in those jurisdictions:

-Know the jurisdiction and what information can be obtained

Different countries offer a different level of information that can be accessed publicly, knowing what is available and the limitations of that information are critical in how it can be used and assessed. Unfortunately even local sources are not always aware of everything that is available because publicly available information does not necessarily mean that it is hosted on a public website. Experience of working in a jurisdiction and knowledge of how different types of information can be legally obtained is critical.

-Understand how an investigation should be structured and what areas to focus on

A professionally conducted investigation cannot be split into constituent parts and scattered between a number of companies or investigators as has become more typical with some of the large volume FCPA suppliers looking for cost benefits. For example, a check of media relating to a company can indicate different information than the company records, however the assumption that the records are correct is not always true as there may be older versions and in extreme cases fake or false company names have been used. Reputation enquiries and media checks may identify court cases outside of the regions being checked, reputation enquiries can also identify situations involving related companies or the company under an old trade name, whereas the media information can indicate potential sources to speak to. In effect everything is interlinked and therefore needs to be assessed as a whole in order for areas of concern or inconsistencies to be identified. Companies that split the investigations up to save costs look upon investigative due diligence as a product rather than a service.

-Understand and interpret the information obtained

In many jurisdictions throughout the world but particularly in the emerging and developing countries, public sources are limited and of questionable use, media is incomplete and there is a lot of opaqueness when it comes to conducting business. For example in one jurisdiction in Central Africa, individuals could easily access and even edit their own court files, subsequently allowing them to change details and thereby making any checks ineffective. In a jurisdiction in Asia, company records are often miss-spelt, sometimes with different spellings in the same document and with a lack of press freedom media information is always positive. In these locations, collecting information through discrete enquiries with industry sources, clients, suppliers and where possible government/official sources is essential to obtaining an understanding of the company you are dealing with. Overlooking this or dealing with the process circumspectly will seriously weaken the usefulness of the investigations. Knowledge of the limitations of the intelligence received and a good level of experience of conducting investigative due diligence, will ensure that the information reported is as effective as possible.

Due diligence investigations are often considered to be less important than other types of commercial investigations resulting in a standard approach with little thought into the information coming back. In reality correctly conducting these investigations, can go a long way to avoiding the need for other types of commercial investigations at a later date.

Asia Diligence is a commercial investigations company that specializes in providing global investigative due diligence services, individual background checks and company background checks as well as targeted commercial investigations. The company’s primary focus is the emerging and developing markets in Asia, the Middle East, Africa, Eastern Europe, South and Central America and it is well placed to support clients looking to, or operating, in these markets.

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