The Necessity Of Due Diligence Investigations: A Three-Phased Approach – Young Upstarts

by Cynthia Hetherington, Founder and CEO of Hetherington Group and author of “OSINT: The Authoritative Guide to Due Diligence: Essential Resources for Critical Business Intelligence, 3rd Edition”.

Due diligence is a critical component in making smart choices and informed decisions, whether for personal, business, or legal purposes. Its intent is to protect people from being led down a road of disinformation, misinformation, or just patent lies.

Due diligence is now a volume game. Data is the single drop of water in an ocean of information that keeps expanding. The due diligence investigator’s job isn’t just to find that drop of water, but to find it twice — that’s how to substantiate or negate a claim.

For example, Yahoo pulled up short when vetting Scott Thompson for the CEO position. Yahoo could have taken a few more steps in verifying Thompson’s claim that he had a Bachelor of Science degree in computer science, which he didn’t. When a news story surfaced that he lied about his education, that headline embarrassed Yahoo and caused fights with investors.

Unfortunately, phony doctors, lawyers, and industry leaders walk among us without holding the required credentials and qualifications to hold their job. To ensure a structured and effective investigation, a phased approach is often employed. This method not only clarifies the process for clients but also helps manage expectations and costs.

The three-phased approach to due diligence is a systematic process that enhances the quality and reliability of the investigation. The activities associated with each phase involve:

Phase One: Online Due Diligence

Phase One focuses on gathering online intelligence, laying the groundwork for further investigation. This phase involves using various online tools and resources to collect identifying data points about the subject.

Key activities include:

Internet research: Searching for general information and specific details about the subject.
Social media intelligence: Analyzing social media profiles to understand the subject’s public persona.
Open-source intelligence: Utilizing publicly available information from diverse sources.
Government databases: Accessing databases for records related to the subject.
Media searches: Reviewing local, national, and international media for relevant news.
Litigation research: Investigating any legal proceedings involving the subject.

A due diligence investigator has access to more than 3,000 databases, enabling a comprehensive background check on individuals and organizations. The findings are compiled into a detailed report covering personal identifiers, financial history, civil and criminal filings, and reputational standing. This report provides a foundation for deciding whether to proceed to Phase Two.

Phase Two: Boots-on-the-Ground Due Diligence

Phase Two involves more in-depth, on-the-ground investigation. This phase includes contacting references, conducting discreet interviews, and retrieving documents from various locations. It ensures thoroughness, especially in areas where online information is incomplete or inaccessible.

Key activities include:

Interviewing references: Engaging with both obvious and discreet contacts to gather insights.
Document retrieval: Collecting records from courts and other institutions.
Surveillance: Conducting discreet surveillance if necessary.

For investigations outside the United States, Phase Two is crucial due to limited online data and stricter privacy laws. Reports from this phase may lead to further actions or conclusions about the subject’s background.

Phase Three: Ongoing Monitoring

If Phase One or Two reveal ongoing concerns, Phase Three involves continuous monitoring and selective interviews. This phase is essential for situations that are still evolving or when initial findings raise additional questions.

Key activities include:

Behavior monitoring: Keeping track of the subject’s activities over time.
Continuous research: Regularly updating findings with new information.
Follow-up interviews: Conducting additional interviews as new information arises.

For example, monitoring a candidate for a CEO position might involve tracking their behavior and interviewing business associates to assess potential risks. Continuous monitoring can provide crucial updates and help clients make informed decisions.

Utilizing a phased approach to due diligence ensures a comprehensive, systematic investigation process. It allows investigators to manage expectations, control costs, and deliver thorough, reliable results. By breaking down the investigation into manageable phases, clients can understand the process better and make well-informed decisions based on the findings. Whether the intent is to unpack a company’s assets, unlock a person’s financial or criminal records, or discover just who isn’t telling the truth, due diligence is essential for mitigating risks and ensuring sound decision-making.

Cynthia Hetherington, MLS, MSM, CFE, CII, OSC is the Founder and CEO of Hetherington Group, a consulting, publishing, managed services, and training firm that leads in due diligence, corporate intelligence, and cyber investigations. She provides specialized training for investigative professionals through the OSINT Academy, and has authored many industry-leading books on conducting cyber investigations, including her latest, “OSINT: The Authoritative Guide to Due Diligence: Essential Resources for Critical Business Intelligence, 3rd Edition”.

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