Frauds Aimed At Businesses Can Take Many Forms

As a professional fraud investigator, I can say that I have seen all kinds of frauds throughout my career. Likewise, many people have tried to commit fraud against me, especially while eagerly traveling the world. So I would consider myself to be pretty astute in these matters.  But even the astute can be challenged.

As a business owner and a due diligence specialist, I know that we have to trust the people we are doing business with …. to some extent.

We trust that they are telling us the truth, that they really do want our services and / or products and they are willing to pay for them.

And if we have aptly employed our due diligence procedures, then we have already vetted our potential new client to verify their legitimacy, purpose and perhaps even their credit history. But how do we protect ourselves when by all accounts, it looks like we entering into a legitimate relationship with a new client?

A few years ago, we were approached by a European investigation firm requesting our services in Canada. According to them, they were working on a multi-jurisdictional fraud case and needed an investigator in Canada to assist them.   Prior to commencing work with them, the company was thoroughly vetted and everything check out. Of course what we didn’t know then, was that this company had been set up and licensed as an investigation agency by former law enforcement personnel (or individuals impersonating them) for the sole purpose of committing fraud.

In order to commence this complex investigation, a substantial retainer was requested and received.   The money came and was quickly deposited however within a few days, the investigation had been cancelled. The client then requested a partial refund as per our contract.

Weeks of back and forth discussions initiating the contract was followed by a short two sentence email cancelling it. Red flag # 1.

We agreed to refund the money once the cheque had cleared. For those of you that don’t know, a cheque has not cleared just because funds have been made available in your bank account. It can take anywhere from 2-4 weeks for a cheque to clear through the international banking system.

Shortly after advising the client of this, we were told that the investigation was back on. Only now, the investigation budget had doubled and they wanted to send an investigator to Canada to assist us. Red flags # 2 and # 3.

For the investigator to receive an immigration visa, he needed an engagement contract. Once in Canada, he would pay the full amount of the investigation up front and in cash. Red flags # 4. By now, it was clear what was going on.

Lucky for us, we had established fraud prevention procedures to follow.

But how many companies wait the full clearance period before issuing refunds? Or get caught entering into engagement contacts that are then used to secure immigration visas? Or worse?

Companies are at risk of being defrauded just by being open for business. Even with the best due diligence program in place, fraud can happen. So don’t stop there. Protect your business from unintended harm by developing and implementing a comprehensive set of fraud prevention policies.

Auto body shop owner conned out of life savings. Man surrendered $60,000 in bogus car-shipping business deal, police say.

A recent article published by the Toronto Star highlights the need for doing due diligence prior to entering into new business deals or transactions!!!  View Article.


M&A 2014 AwardsI am pleased to announce that ENVIRO-LYNX INVESTIGATIONS has just been named a 2014 M&A Award Winner for DUE DILIGENCE FIRM OF THE YEAR: CANADA by Acquisition International.

Enviro-Lynx Investigation also won the M&A Award for Fraud Investigator of the Year: Canada in 2012 AND 2013.

For more information on this award, you can visit the Acquisition International’s M&A Awards site. You can also view more information and regular updates on our Facebook page

Failure to screen candidates properly leads to expensive mistakes!

Savvy consumers don’t buy a car or a house without first taking a good look at what we are buying.  Likewise, employers shouldn’t be hiring employees or employing third parties (individuals or companies) without first understanding who they are and what their background is.

We offer a number of screening services as well as background and due diligence programs that will help you reduce your risk and improve your decision making process by providing you with the most accurate, up-to-date information possible.

When to call an investigative specialist for your next due diligence investigation?

There is certainly no shortage of service providers that claim to provide professional due diligence services.  It’s a fairly new trend that has been picking up steam and public record companies, investigative database companies, online information brokers and investigation companies are jumping on the band wagon, head first.

But before you select a service provider, there are a few things you should consider.

Public record companies are not licensed investigation agencies nor do they employ investigators or researchers.  They can conduct a group of searches that they will call a ‘due diligence investigation’ quickly and cheaply however they will require that you provide all of the party information (legal names, dates of birth, addresses etc) needed for the searches to be conducted.   Then they conduct the searches and provide the results.  Which is great if you know exactly what you want and you have all of the correct information to start with.

Since public record companies are not licensed agencies, they can’t use any investigative skills, tools or resources while conducting a due diligence investigation.  They just conduct the searches that were requested using the information provided.  So if you requested several ‘due diligence’ searches to be conducted on a company called ABC Management Inc and the actual legal name of the company was  ABC Management Group Inc, most if not all of your searches would come back with inaccurate results.  Likewise, if you thought ABC Management Group Inc was located in Toronto but it was actually located in York Region, your searches would come back with inaccurate results.  The worst thing is, you may not even know that you have inaccurate results and using this information to make key decisions might lead to significant risk. 

Companies that sell information through investigative databases as well as online information brokers also claim to meet all of your due diligence needs.  And they do a great job of providing large amounts of data for one great price.  The only problem is that they are first and foremost data aggregators.  Not only is their data notorious for being flawed, no one company has complete coverage of all information resources.  So knowing which database to use, when to use it and how to use it becomes key.  These resources are generally used by skilled investigators that can search the appropriate resources, compile the data, analyse the data and then verify the data through other sources.  So although these investigative databases and online information brokers market directly to the end consumer, the data they provide is only a small part of what is required to conduct an actual due diligence investigation.  Don’t be fooled into thinking you have all the information because you obtained an investigative report on a subject.  Relying on such a report to make key decisions might lead to significant risk.    

When our company first opened for business, we choose to specialize in due diligence and business background investigations.  Over the past 15 years, our skills have improved, our resources have grown and our products and services are much more comprehensive. In fact, most of our clients were other investigators who needed our specialized services.

Over the past few years however, private investigators have become more computer savvy and have started offering their own due diligence services.  Granted, there are some investigation companies that have done a great job at creating specialized due diligence departments in-house while other companies have gone on to specialize in pre-employment screening and background checks.  But there are many more investigation companies that consider due diligence nothing more than doing a few public record searches.  And few companies are actually able to go beyond the basics.

It takes a keen understanding of what due diligence is required to achieve the client’s goals, specialized knowledge, an analytical approach, an investigators eye and most of all, access to the right resources to conduct a well designed, comprehensive due diligence investigation.  

That’s why we employ only individuals with a business or research background who are ALSO Certified Professional Investigators, Certified Fraud Examiners and open source intelligence specialists.

It’s also why we constantly upgrade our skills, maintain subscriptions to several hundred professional databases worldwide, have access to hundreds of thousands online and on-the-ground resources, incorporate cutting edge technology into our investigations and reporting formats and maintain a large network of investigative professionals worldwide.

Our personal, hands on approach to due diligence and business background investigations means that each investigation is conducted by a team of investigative professionals and coordinated by company’s owner and operations manager.

Our goal is to provide our clients with the due diligence they need to make informed decisions.  We also consider it our responsibility to help educate people on the benefits of effective due diligence.  So if you have any questions, please don’t hesitate to contact us.

Should you be conducting a Corporate Due Diligence Investigation?

Due Diligence has become a popular phrase in our business. We interpret due diligence to mean “detailed scrutiny of individuals or entities and the production of comprehensive, detailed reports, enabling our clients to make important decisions about the suitability and ability of the subject to perform a certain role”.

When should we conduct a Corporate Due Diligence Investigation?

You should find out exactly who you are dealing with before making major business decisions such as buying a business, contemplating a merger, signing contracts, awarding contracts, taking on new clients, vendors, suppliers or subcontractors, extending credit or investing in new products, services or businesses.

A Corporate Due Diligence Investigation can provide the following information on a company:

  • Corporate Structure
  • Director & Officer Names
  • Shareholders & Key Players
  • Corporate History
  • Financial History
  • Litigation History
  • Regulatory & Compliance History
  • Public Activities
  • Reputation (of the company and / or its products & services)

An essential part of due diligence is also verifying information provided by a company such as  business licenses, certifications, assets and location of operations.  A due diligence investigation will often include an investigation of the company’s owners, directors, officers, key personnel or major shareholders.

So if you think you a Corporate Due Diligence Investigation, contact us and let our experience team of due diligence investigators help you figure out what you need.

How can you make good decisions without good information?

The other day, I had a call from a friend.  He wanted to know how to conduct a due diligence on a company that he wanted to invest a substantial sum of money with.  He gave me the company’s name and the name of the individual that he was dealing with.  That’s all he had.   After a few inquiries, I determined that the company had only been registered a month.  The administrative address for the company was a post office box and there was only and director – lets call him John Smith since his real name was almost as common as this one.

After many, many hours of research and utilizing almost ever resource at our disposal, we were finally able to identify John Smith,  the business owner.  Subsequent inquiries revealed John Smith’s involvement in a long list of bankrupt companies, on-going civil cases and a number of IRS / tax related cases and liens.  Definitely a guy with a questionable business capabilities.

Since this request came from a close friend, I called him as soon as I had put all the pieces together.  Much to my surprise, and it takes quite a lot to surprise me these days, my friend had gone ahead and invested his money with John Smith less than 6 hours after making the initial call for help to me.  He said he didn’t want to miss out on  this “once in a lifetime opportunity”.

Needless to say, he is now trying to get his money back from John Smith.  He also graciously agreed to let me tell his story here in the hopes that others will think twice and do their due diligence prior to making major investments or business decisions.

Less than half of UK firms carry out due diligence in their supply chain

An interesting article was posted on Continuity Central that I thought might be of interest to you all.  I found it very enlightening …

Ernst & Young’s Fraud Investigation & Dispute Services team found that 48 percent of UK firms carry out due diligence in their supply chain, with a further 30 percent never doing any checks. The survey of procurement managers and directors also reveals only 6 percent have ever been made aware of unethical activity in their supply chain. The research, which covers UK companies operating across a range of sectors and countries, also found that 14 percent did not know what third-party due diligence meant.

John Smart, Partner and UK head of Ernst & Young’s Fraud Investigation team, said: “The current issues around contamination of products have highlighted the importance of understanding and ensuring the integrity of the supply chain, which is a big part of the DNA of many businesses. Companies are, in most cases, responsible for the actions of third parties acting in their name; however our research reveals that firms, across a range of sectors, are not carrying out basic checks.

“In the case of packaging, when stating the provenance and integrity of products, companies must be able to stand by their claims, requiring transparent disclosure of the entire supply chain. Companies need to be able to defend such statements and to demonstrate traceability of the data and declarations upon which it relies and which form the basis of the trusted relationship it attempts to build with its customers.”

Under legislation firms must ensure that they have put in place measures to ensure the prevention of potential wrongdoing among business partners acting in their names. In particular, following the introduction of the UK Bribery Act, companies must demonstrate they have ‘adequate procedures’ in place to address third- party risks. If they are not compliant companies can be fined or executives imprisoned.

Smart continues: “Relevant laws and regulations, the approach of enforcers and public expectation mean it is crucial for companies to adopt the same risk procedures for third parties that they would routinely enforce in other parts of their business. Firms need to ensure they have an appropriate procurement policy embedded across the organization. It is also important to clearly capture information about the sourcing of products and materials to ensure highlighting of potential non-compliant behavior.”