Time for Agents to Step Up Due Diligence

Oxford Analytica recently published a report: Due Diligence in Investment Migration, within which details the minimum recommended industry standard for the investment migration market. This report is co-authored by the IMC, BD, Exiger and Refinitiv.

Harod is one of the providers for due diligence (DD) in this market and as such is experienced in the quality of applicants and their agents. It has been noted by Harod, and no doubt others, that the quality of applications is at times much to be desired, despite industry standard recommendations detailed within this report:

For example:

The report sets out that it is the role of agents to initially screen candidates, this empowers the agents to reject candidates that fail (or could fail) to meet the due diligence requirements. It is appreciated Agents have competing interests between on boarding a new client for revenue against applying a robust KYC/ due diligence process that could cause the Agent to reject the client. Harod would argue the latter out-weighs the former as the reputational risk to the Agent will, in the long run become tarnished if it becomes apparent they are not undertaking any background verification and putting forward poor standard of applicants.

As such, agents have the first opportunity to identify and reject candidates that fail to meet due diligence requirements. As part of their KYC regime one key factor that should be assessed is the legitimacy of the sources of funds.

In Harod’s experience, 80% of red flags raised relate to source of funds and general finances. This causes from an AML perspective an immediate concern. Many of these flags may not have been raised had the applicant provided sufficient and up to date documentary evidence with their application.

Most common issues are:

Historic banking statements supplied, insufficient funds within said banking statements, business accounts provided (not personal), inflation of bank account immediately prior to application from unknown sources, lack of evidence of salary and finally lack of detail within statements, making assessment of source impossible.

When red flags are raised, this causes delay and additional work for the client, agent and applicant post the DD process.

Also raised by this report, is the lack of uniform regulatory oversight and the need for minimum standards, it is suggested that consistent documentation should first be addressed. There are many instances where applications are wholly incomplete, we have experienced:

1. Missing pages from application forms

2. Declaration pages not signed

3. Documentation missing, such as Criminal record checks for additional jurisdictions, ID / residency cards. Most common is lack of birth / marriage certificate. Lack of accuracy where the main applicants provides an address for a dependent applicant that differs from that declared by the dependent. In several cases we have seen differing dates of birth, between all applicants of large families. These errors immediately demonstrate the Agent has not undertaken even the most basic of checks. 

Harod has a recent case where children (under the age of four) were resident in a different jurisdiction (and continent) to the main applicant (their mother). No explanation of the disparity was provided.

These basic errors immediately put the DD provider on “alert” and raise the suspicion that the Agent has not even done basic due diligence on the client. Agents have a duty to their clients and these basic errors are not meeting this requirement. Even worse is when agents are tempted to cut corners as for example Harod have found fake signatures and job references. These will be found out, it is not worth the short cut in the long run.

All areas of the industry need to work together to maintain the integrity of these programmes. Harod have proposed for some time that a register of agents, where those involved in falsifying documents can be flagged up to other DD providers.

About

Harod Global Investigative Solutions is led by founder and Managing Director, Martin Dubbey. Martin worked in UK law enforcement for more than 30 years, with HM Customs and the Serious Organised Crime Agency (now the NCA). Harod retains state-of-the-art proprietary cyber technology which supports our extensive team of leading global investigators. Over recent years, we have also helped identify more than $1billion in hidden assets, both onshore and offshore.

Martin Dubbey Managing Director
Aimee Lisle (MSc Counter Fraud, Counter Corruption and Intelligence, IM – Investment Migration Certificate)
Senior Investigator
Harod
www.harodassociates.com

This article appeared in the first edition of the CBI citizen magazine