Due Diligence Matters – June 2023 Bulletin

On 21st June, perfORM will be partnering with Dasseti to discuss the use of technology in ODD via an exclusive webinar. Please click here to register. 


Investment Manager ODD Report Solution Clients

Our ODD Report Solution is not just another tick in a box, it is a new approach to operational due diligence. A pragmatic solution for Investment Managers and Service Providers which engage us to complete an ODD review.
We target a 6-week turnaround, and our ODD process is significantly less onerous and time consuming compared to a data-heavy, sample-based controls audit. Clients need only allow for interviews with key staff and document provision. In addition to the below, we currently have a growing number of clients in progress.

  • Virtual Asset Service Provider: Copper Technologies (Switzerland) AG – please contact Adam Groom to request access to our March 2023 dated ODD Report
  • Investment Manager: Old Street Digital Limited – please contact Paul Ridley to request access to our April 2023 dated ODD Report
  • Investment Manager: Hyperion Decimus, LLC – please contact Chris Sullivan to request access to our March 2023 dated ODD Report


Spotlight on Enhanced Background Checks

Narrowing it down

The word “Enhanced” helps to give focus to an otherwise broad practice, ranging from simply asking a mutual contact for an informal verbal reference to engaging private investigators and everything in between. To add to the confusion, “Due Diligence” is often used (we have previously noted that by typing ‘due diligence’ into Google, in less than half a second, 94 million results appear) to describe background checking, also often referred to as screening. Further, whilst it is not full KYC / AML, it can be used to help support compliance with AML / KYC regulations, USA Patriot Act, Foreign Corrupt Practices Act (FCPA), UK Bribery Act, and ever-evolving sanction lists.


What it means to us

For us, Enhanced Background Checks (“EBCs”) combine human and machine to help clients identify and assess potential risks emerging from their new and existing clients, prospects, investment targets and / or other third parties.


For many Allocators, background checks form part of a robust due diligence process on an Investment Manager. We include EBCs (individual and entity level), on an initial and ongoing monitoring (including adverse media) basis, as part of our Allocator On-Demand ODD services.


Standalone clients

We are regularly asked if we can provide EBCs as a flexible, standalone solution. As a result, we now deliver EBCs to a growing client base, including Allocators; Investment Managers; Fund Administrators; and companies providing Private Client Services. Clients benefit from a discussion and Q&A call with us to supplement our EBC report(s).


Human and machine

For EBCs, the use of AI is not new and we are partnered with a leading alternative data service provider, Exiger DDIQ (founded by the former Kroll CEO and EVP). By using innovative technologies and analytical intelligence tools, we deliver informative EBCs and risk taxonomy across different jurisdictions and in different languages, using publicly available information only.

Our EBCs are differentiated – they are led by one of our UK based consultants, a multilingual certified anti-money laundering specialist (CAMS) who previously worked as an arms export analyst at the Israeli Ministry of Defence and as an enhanced due diligence analyst at major financial institutions covering high-risk entities and individuals. This human overlay creates high-quality, customisable, and cost-effective EBCs.


What the FCA thinks

In accordance with the FCA financial crime prevention guide, “enhanced due diligence will give the Firm a greater understanding of the customer and their associated risk than standard due diligence. The EDD report as such will be commensurate to the risk associated with the business relationship.”


What we deliver

EBC clients receive a succinct perfORM report, in addition to Exiger DDIQ reports (typically 50-150 pages) as appendices. Our EBC reports contain key facts, a summary and a risk checklist including:


  • PEP Association; Sanctions Lists; Criminal history / associations; Terrorism / Proliferation of WMD; Judgements / Insolvencies; ICIJ Leaked Papers and Offshore Affairs; Primary Business Activities; Associated Entities; Jurisdictional Risks; Structure – Complexity and Rationale; and Adverse Media.


We provide a holistic assessment as to whether the screened individual/entity poses low / medium / high reputational risk; and


  • We avoid including false positives in our EBC reports;
  • Where possible, we ask clients for non-sensitive information (treated as confidential and any personal data is processed in adherence with the GDPR) on target individuals and entities to support our initial EBC; and
  • Turnaround time is typically a week.


Case study

In one of our most recent cases, we performed a prompt (end to end process of less than a week) EBC, on behalf of a private trust service provider, on an ultra-high-net-worth individual (UHNWI) from a high-risk jurisdiction. Throughout our multilingual review, we uncovered adverse findings pertaining to the individual’s family wealth and acquisition of foreign citizenship under questionable circumstances. As a result, we identified potential high risks of money laundering and allegations of obstruction of justice. Following submission of our EBC report and accompanying discussion call, the private trust service provider decided to reject the individual as their client as a matter of reputational control.