Human Intuition Is a Valuable Due Diligence Tool
Wednesday, July 25, 2018
By Scott Shaffer
Two days ago, one of my
senior analysts burst into my office proclaiming, “You can’t imagine what I
found and how I found it!” My interest was piqued so he took a few minutes to
explain the situation.
My analyst found a government connection, which is not uncommon considering the
subjects we are often asked to research. But what is uncommon is how he found
He had been conducting a rather routine background investigation. All the
information was clean and accurate, and aligned with the client-supplied data
(identifying information, civil/criminal checks, adverse media, business
affiliations, sanction/dpl screening, local intelligence in the given locale,
etc.). The standard channels for research had produced nothing unexpected -- no
red flags or reasons for concern. But then he came across a podcast given by
the principal earlier this year, so he took about 15 minutes to review the
During the introduction, the principal provided a brief bio that matched the
resume we were provided by the client. However, during a later segment in the
podcast, the principal disclosed a former political position he had held, which
was not listed on his application or resume, nor would it have been located
during a standard analysis of the business, media, and databases records or
through local intelligence. It was only discovered because our team was willing
to look at everything, and dig deeper into all available sources.
People often ask me, “don’t you think human analysis investigations will go the
way of compact disks, with artificial intelligence and massive databases
containing everything necessary to complete a sufficient background check?”
It’s situations like the above, which make the human touch necessary and
prudent when conducting enhanced due diligence.
Unfortunately, there are no silver bullets when it comes to research. For as
many times as red flags are found through local source commentary, they are
also found in an adverse media or sanctions/dpl/pep screening. And,
occasionally, through reviewing a podcast.
Then, what’s the best solution? It’s a challenge. Typically, the solution
includes a combination of several resources. There are a plethora of available
databases that contain vast amounts of data on both companies and individuals.
They are relatively cheap -- and information is quickly accessible and allows
for an almost simultaneous review of data subjects. However, serious
limitations exist, and the data is only as good as the available content which
the database contains.
Desktop solutions allow for databases and other publicly available information
to be reviewed by a trained (hopefully) analyst, whose skill set is focused on
research and the ability to sort through vast amounts of evidence in the hopes
of locating the proverbial needle in the haystack. More information is analyzed
than just what is found in databases. The human element allows for dynamic
analysis which can trigger additional areas of research. But, these reports
require additional time, lack on-the-ground intelligence, and are only as good
as the analyst reviewing the data.
Finally, combining the above two methods with local, on-the-ground research
(since we all know that certain records in certain jurisdictions are only
accessible by going direct to the source) allows for the most complete profile.
It provides direct verification of corporate records and civil/criminal filings
and reputational queries and it utilizes a local investigative source who is
familiar with the intricacies of that locale. This option may cost more and
take more time, but the results are more accurate and complete than the other
Regardless of the risk profile, the level of due diligence and your company’s
commitment to its compliance program, there is no way to guarantee that you
will uncover all of the potential issues that may arise (see podcast reference
above). However, complying with your internal compliance program with a
risk-based approach, and analyzing each potential relationship with an
inquisitive eye, can provide a substantive argument for the engagement and why
you chose to pursue it.
Because the most important part of the story might be waiting just a step or
two beyond what is evident and most easy to see.
This article originally appeared on The FCPA Blog.
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