Connecting the Dots with Depth and Breadth
By Melissa Tan
Investigative due diligence is about connecting the dots. In today's digital age, it appears easy to gather information with Google or AI tools. Nevertheless, the value of business investigation lies in the expertise and ingenuity of turning facts into insights.?
Due diligence has become a critical component in major business transactions. Anti-corruption and anti-money laundering laws make financial institutions responsible for knowing their customers, counterparts, and investment targets. Failing to do so leads to serious legal and financial consequences.
Yet, fraudsters are better at covering their tracks, and investors are pressured to close deals. To conduct due diligence thoroughly in a timely fashion, more are turning to skilled investigators that understand the information they seek with the creative means to obtain it and the knowledge to analyze it. Today, we examine how business investigators find and connect the dots with depth and breadth.
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Finding the right dots
The abundance of information (both real and fake) has transformed the world of business investigation. It is no longer about offering quantity information but quality insights. While conventional search engines provide a trove of information, open-source data gathered from official sources are far more reliable and accurate sources of intelligence.
Open-source intelligence analyzes publicly available government records, legal documents, public company announcements, and other official information to develop meaningful insights. Public information includes government records (like auto licenses and property ownership), company registry information, court documents, and bankruptcy records.
The availability of government records varies between jurisdictions. As such, the ability to derive meaningful insights from these records hinges upon knowing what information is available and how to retrieve it legally.
At Headland Intelligence , we subscribe to over 30 proprietary databases covering court documents in multiple jurisdictions, including Hong Kong, Singapore, Australia, New Zealand, Argentina, and Peru. These databases allow us to search for companies or individuals involved in legal disputes, claims, or entanglement over the years.
Desktop and open-source research may not provide all the information needed, particularly in jurisdictions that still operate offline. In these circumstances, field investigators come in handy. With an extensive research background and network of sources, our journalists-turned-investigators can interview authority figures quickly and legally or visit government offices, archives, and libraries for information.
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Connecting the dots
Access to a wide range of information is only part of the investigation. A helpful investigation is not a data dump; it is about connecting the data for meaningful insights.?
The company registry provides only simple information like registration dates and registered addresses. Meanwhile, scrutinizing this information among companies may indicate they were set up within days and shared the same company secretary and registered addresses, highlighting hidden connections.
When that information is connected to government records of real estate ownership or licenses of automobiles, yachts, and planes, investigators can estimate a company's value and assets. This information is critical for pre-litigation investigation, allowing the potential plaintiffs or creditors to ensure the company's value to determine the next steps of legal proceedings.
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The inconvenient truth
Not all facts discovered align with the investigation objective. When IPO sponsors have deadlines to meet and investors are keen to close deals, red flags found of the investigation target could be questioned or even ignored.
One well-known example is the conflict of interest between FTX and Alameda Research. Despite the glaring connections between the two companies, investors ignored the red flags, resulting in consequential losses. Other investors may confront the harsh reality with disagreement or doubt.
This is when transparency and documentation become crucial. Headland Intelligence is rigorous about documenting the intelligence-gathering process. We provide sources' names, contact details, and communication records whenever possible to ensure an ethical and credible investigation. This practice reassures the methodology's integrity and enhances the data's credibility, leaving minimal room for manipulation of facts.
Not everything an investigator finds is important or even accurate. Responsible and knowledgeable investigators can filter the information, question the facts, and provide the context that aligns with the investigation objective. The rising number of conventional search tools, proprietary databases, and AI tools can be helpful. Still, there is no substitute for well-informed, credible, and nuanced intelligence in due diligence investigations.
Melissa Tan is Managing Director of Headland Intelligence, having founded the company in 2021. She takes pride in being the first port of call for many business owners, not-for-profits, and professional parties when problems arise.