Trust in unverified business partners comes with a high price

A HIGH PRICE WAS PAID BY A SMALL GROUP OF INVESTORS WHO PUT THEIR TRUST IN AN UNVERIFIED BUSINESS PARTNER

• LACK OF DUE DILIGENCE COSTS INVESTOR GROUP MILLIONS: Investment Due Diligence

THE INVESTMENT INDUSTRY

Fraud is of the utmost concern for all financial organisations. Having safeguarding processes in place is required both from a legal and compliance standpoint and from the position of being a trusted, secure financial institution. These include banks & financial institutions, real estate lenders, business credit and finance companies, commercial investment corporations, asset-based lenders, debt financing firms, acquisition capital firms, etc.

The financial sector includes new Anti-Money Laundering (AML) rules and legislation, and these regulations are strict and increasingly enforced. As such, remaining in compliance by implementing proper prevention controls is necessary. Failing to do so can mean a loss of business, trust and reputation: banking giant Citibank was recently fined $70 million in the US for failing to address shortcomings in its anti-money laundering policies. (Reuters, 2018)

Professional services organisations also face accounting fraud risk – with embezzlement being one of the biggest threats. At CRI Group™, our forensic accountants are trained to follow the money. And when it comes to AML services, CRI Group™ is uniquely positioned to help organisations stay ahead of the curve with anti-money laundering measures and the processes required to fully comply with applicable laws and regulations. This provides financial institutions, their business partners, and their clients the confidence to know that the organisation and its reputation are protected from the negative consequences of money laundering. Learn more about our solutions for your business.

INTRODUCTION

A small group of investors in the US interested in engaging in extensive economic and humanitarian projects overseas recently learned the high cost involved when proper due diligence is not performed. The investor group placed its trust in a very persuasive individual, an Australian man who presented credentials that purported to tie him closely to the royal family in Dubai and major banking centres in the UAE.

This individual made several in-person visits with the investors in the US, during which he detailed a plan to help them monetise their assets to facilitate necessary lines of credit at a bank in Dubai. With an impressive resume and the impeccable air of a serious business mover, the investors decided to engage in a Joint Venture Agreement with the man, and the project was underway.

LARGE CASH DEPOSITS

Unfortunately (as it would turn out) for the investors, their new partner had convinced them that the first stage of building the needed lines of credit involved making large cash deposits to the bank – through him as an intermediary.

Handing over the first hundreds of thousands of US dollars, followed by two deposits totalling nearly $6 million, the investors now waited for their credit lines to open. One delay turned to another – with every phone call, their “partner” had an excuse for why there had been no action resulting from the cash exchange. In the end, it all turned out to be a fraud. This individual had deposited a huge amount of money for himself and done nothing as agreed upon with the investors.

After calling the FBI and law enforcement in Dubai, the investors reached nothing but a dead end. When they called CRI Group™ for help, there was no trace of the money or the at-large fraudster.

WHAT THE INVESTIGATION REVEALED

CRI Group™’s due diligence investigation revealed what the investors should have known before doing business with this individual. Among the revelations:

It was a difficult and incredibly costly lesson for the investors in due diligence. Any of the above facts about the criminal fraudster could have been discovered by CRI Group™’s experts before the investors had sent millions of dollars they will probably never get back.

Who is CRI Group™?

Based in London, CRI Group™ works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk Management, Employee Background Screening, 

In 2016, CRI Group™ launched Anti-Bribery Anti-Corruption (ABAC™) Center of Excellence – an independent certification body that provides education and certification services for individuals and organisations on a wide range of disciplines and ISO standards, including ISO 31000:2018 Risk Management- Guidelines; ISO 37000:2021 Governance of Organisations; ISO 37002:2021 Whistleblowing Management System; ISO 37301:2021 (formerly ISO 19600) Compliance Management system (CMS); Anti-Money Laundering (AML); and ISO 37001:2016 Anti-Bribery Management Systems ABMS. ABAC™ offers a complete suite of solutions designed to help organisations mitigate the internal and external risks associated with operating in multi-jurisdiction and multi-cultural environments while assisting in developing frameworks for strategic compliance programs. Contact ABAC® for more on ISO Certification and training.