The Due Diligence Mess: Why Ponzi Schemes and Investor Fraud Will Continue without Radical Change
By OffshoreAlert, February 18, 2010
“Radical changes” in the way that most people conduct financial due diligence are required to stem the tide of financial crime, according to a leading criminal analyst.
The common practice of relying largely on “inadequate” databases or assuming others, particularly regulators, will do the work for you is a recipe for losses, says US-based risk management consultant Dale Yeager. Most databases contain large amounts of inaccurate or out-of-date data and, even when the information is accurate, its significance and relevance is often not recognized by the “untrained eye”, he says.
A much more effective process is to treat every due diligence as a forensic criminal investigation, which includes learning to recognize indicators of dishonesty in someone’s personality and behavior, says Yeager, who is CEO of SERAPH Corporation, which is headquartered in Pennsylvania.
“The current state of due diligence is woefully inadequate in determining risk,” says Yeager. “The current focus of such efforts is mistakenly solely placed on the company being purchased or the organization that will handle the client’s money and not on the people operating these entities.
“Professionals and investors alike must understand the need for forensics within this process. Due diligence is about assessing the people and people assessment has and always will be the domain of forensic psychology.”
He adds: “Ethical, cautious, professional people and organizations provide safe havens for investment. Those qualities are best discovered through forensic psychology and criminal investigation models.“
Just as forensic accounting is a powerful tool in vetting the numbers of an organization, forensic criminal investigation models are just as powerful in vetting the quality and ethics of people leading an organization.”
Yeager will show investors, compliance officers and others how to conduct proper due diligence in two sessions about what he calls ‘The Due Diligence Mess’ at the at the 8th Annual OffshoreAlert Financial Due Diligence Conference, in Association with Grant Thornton, which will be held at The Ritz-Carlton, South Beach on May 2-4, 2010.
In this two-hour action lab, participants will learn ways to enhance their due diligence investigations with the use of criminal forensics. Specific topics to be addressed include how to treat due diligence as a criminal investigation, overcome database inadequacies and understand data in context for improved results.
Register Now to reserve your seat and attend this and 28 other unique sessions presented by industry experts from the world's top organizations.
The Due Diligence Mess: A Radical Approach to Due Diligence
Indictments for Ponzi schemes and investor fraud have been increasing every day. While pundits, congress and financial experts pinpoint problems with regulatory agencies such as the SEC, the real problem centers on poor Due Diligence in the private sector.
In this two-hour action lab, participants will be taught to improve their Due Diligence investigations with the use of criminal forensics.
- The Problem with Databases: How to overcome their inadequacies
- Treating Due Diligence as a Criminal Investigation
- Understanding Data In Context: How to assess data psychologically for improved accuracy.
Dale Yeager, SERAPH (Pennsylvania)
