This article was first published as a chapter in Essential Intelligence: Fraud, Asset Tracing, and Recovery 2023. Written by Olena Morozovska, Matthew Taylor, Tom Stanley, and Anastasia Beck. Reproduced with permission. © 2023 Commercial Dispute Resolution. For further use, please visit www.cdr-news.com.
The world of business intelligence and corporate investigations has not been left untouched by the unstoppable march of technological innovation. Today’s investigations benefit greatly from technology-driven solutions to the broad range of problems, both old and new, with which clients come to investigators. The application of technology undoubtedly gives investigators more capacity to focus on strategising and creative problem solving through the streamlining of processes, allows better analysis of vast datasets, and unlocks investigative avenues that were previously unavailable. This all helps in achieving the best possible outcomes for clients.
However, in this chapter we argue that technology and artificial intelligence will never truly serve as stand-alone solutions for investigations, and we explore the uniquely human contributions—and value—of human investigators.
Currently, artificial intelligence and technology are commonly used by investigators to streamline and automate open-source and public record research. However, even with access to an array of high-quality databases and records repositories, human input is still paramount in order to draw out all relevant connections and to maximise the effectiveness of open-source research.
For example, investigators can automate searches across online corporate records archives, significantly cutting down time needed to map a subject’s corporate footprint. However, completing and validating this research requires the subsequent retrieval of the original corporate filings from the official source. These records often sit behind a paywall and have to be purchased by a human investigator with a payment card. Original records are the gold standard of evidence in an investigation, providing official and up-to-date information on the company in question, and can be relied upon in court if required. A human review of such records also frequently yields new and unexpected intelligence in an investigation, such as signatures, new names of business associates, information on banking relationships, and names of previously unknown related companies. An experienced human investigator can also uncover alternative or fake names or aliases used by subjects, which can then be run through databases to find new information.
In one previous case, K2 Integrity were instructed by a client to identify the global asset footprint of a public official believed to have acquired substantial assets outside of their home country through bribery and corrupt schemes. K2 Integrity were ultimately able to connect the subject to ill-gotten assets—a global portfolio of high-value real estate—through in-depth analysis of social media profiles belonging to the subject’s family. Through this analysis we were able to identify a network of nominees used by the subject to hold the real estate on their behalf, obfuscating the connection between the subject and these high-value assets. The link between the subject and these properties did not exist in official records and, at present, only a human investigator is capable of recognising the types of people who might be proxies and hide assets on others’ behalf.
Open-source research can in itself be limited. Certain jurisdictions remain virtually impenetrable in investigations through open-source research, either due to the underdeveloped nature of public registries in some jurisdictions or to intentional efforts to obstruct access to public interest information in others. This includes not only the well-known tax haven jurisdictions, but also jurisdictions such as Canada and Germany, where many registries feature paywalls and the information that is publicly disclosed can be limited due to privacy laws and other local concerns.
In recent years we have also seen regression in some jurisdictions in terms of corporate transparency and public access to other official records, making human source intelligence all the more important.
For instance, in a 22 November 2022 ruling, the EU Court of Justice delivered a blow to corporate transparency across EU Member States, as it invalidated the right of public access to beneficial ownership registers of companies registered in these jurisdictions. In justifying the decision, the Court commented that “the general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data”. As we have seen, a number of Member States, including Luxembourg and the Netherlands, have already begun the process of taking down local beneficial ownership registers.
Deterioration in access to public interest information has also taken place outside of the realm of corporate registries. As an example, one European jurisdiction that has been historically challenging in terms of information access has recently made the task of accessing local court records and property records even more difficult. Whereas before, all accessible court records could be retrieved by a lawyer visiting one court, the new rules in this jurisdiction mean that records can now only be retrieved by a local lawyer visiting each individual court holding the relevant records. With respect to property records, additional legal identifiers for a property owner are now required by the local land registry in order to retrieve official property ownership records.
Speaking to People
Getting out from behind a desk and speaking to people, i.e., human intelligence, is an indispensable component of an investigator’s toolkit, and this is set to remain the case for the foreseeable future.
At the point when open-source research hits its limit, or indeed at a dead end, a human investigator will pick up the phone and start speaking to people to advance their investigation. For example, although some jurisdictions offer a good level of access to public records in principle, accessing these records still requires a phone call or even a physical visit to a records repository. In such jurisdictions, it is also often the case that a good relationship with staff at registry or court offices is helpful in running searches effectively, and in retrieving all possible records.
Commentary from well-placed people can yield information about the subjects of an investigation that is not accessible via desktop research, and this is often the case when trying to understand a subject’s lifestyle and reputation. In one previous case, K2 Integrity was tasked with investigating a Singapore-based businessman who had partnered with our client. The public profile of the businessman was very positive and a trawl of corporate, property and legal records provided no red flags. However, calls to former business partners revealed that the businessman had a reputation as a brash and confrontational character who had refused to honour several smaller debts, deemed not worth pursuing through the courts. In one instance, a source informed K2 Integrity that the subject had intimidated him into dropping efforts to recover a debt by threatening to send people to his home address. None of this intelligence was in the public domain and therefore would be highly unlikely to be collected through any data aggregators.
In another recent case, K2 Integrity were instructed by the client to investigate a European supplier of refractory products that were suspected of using unlawful practices to win business, including corruption and bribery. Due to a lack of detailed allegations, we conducted human source enquiries to establish investigative leads relating to the allegations, which could then be pursued and corroborated. We conducted discreet source enquiries with the subject company’s former employees, as well as with former employees of known clients of the subject. Our source enquiries uncovered numerous allegations of systemic corruption within the subject company, in particular its South Asian and Middle Eastern operations, which were not available in open sources. These included gift-giving to clients and benefitting from corrupt procurement processes in the Middle East.
Human source intelligence can be of vital importance in jurisdictions where corruption is widespread, making public record information not only difficult to retrieve, but difficult to rely upon. In K2 Integrity’s experience, bad actors are particularly well versed in exploiting such systemic vulnerabilities, obfuscating their footprints in official records through the alteration or removal of data, using nominees to hold interests on their behalf, or simply lying on the public record. Alas, even the development of beneficial ownership registers in several jurisdictions has had limited impact on curbing illicit activities, with K2 Integrity witnessing several instances of lawyers, accountants, and trust managers being named as “beneficial owners” of assets strongly linked to controversial characters.
Human intelligence can prove invaluable in almost any type of investigation: a simple pre-transactional due diligence exercise, an anti-money laundering investigation, an internal wrongdoing investigation, or in the tracing of assets subject to judgment enforcement which have been hidden by debtors.
Physical surveillance is another method of intelligence gathering open to investigators, and one that can be performed judiciously only by experienced human investigators, working on the ground.
Surveillance is a labour-intensive and high-cost exercise that should be embarked upon with clear and predefined objectives. A good investigator will be able to advise clients on whether surveillance is the appropriate and necessary approach and agree upon clear objectives. Human investigators are also able to consult clients on how best to conduct surveillance in different jurisdictions, in compliance with the relevant local laws.
Although it can, on occasion, be the only available method of establishing facts, it is most often used to support other methods of investigation. When open-source work and speaking with people are exhausted as sources of information, getting out from behind the desk is a logical next step for advancing an investigation.
For example, while corporate filings retrieved from a corporate registry may provide an address for a company of interest, in many cases it is not possible to establish whether the address is merely an office address or is also a residential property for the subject of the investigation. In such cases, a human investigator physically visiting the location may be the only way to determine the true purpose of the address and who uses it. If, for example, the subject is seen by the investigator to be entering or exiting the property during their visit to the site, the investigator has also established a potential service address for an elusive subject, should the client be looking to initiate legal action.
In a recent case, we were supporting a client with an investigation into a group of its former employees, who were suspected of stealing intellectual property from the client to set up a competing business in another jurisdiction. Through a combination of social media and physical surveillance, K2 Integrity established the country to which the former employees had permanently relocated, and through site visits to their new business premises we obtained compelling evidence that our client’s intellectual property was used to set up and run the new business. Monitoring the subjects’ residences also enabled K2 Integrity to serve the former employees when the client was ready to take legal action.
In another recent case, the subjects of our investigation were former shareholders of a bank (our client) that had embezzled significant funds from it and who were subject to civil proceedings locally. The subjects subsequently transferred a significant portion of the embezzled funds and fled abroad, rendering the local proceedings futile. The subjects had gone to great lengths to conceal their locations, as well as their ill-gotten assets and current activities. In agreement with our client, K2 Integrity tracked the subjects’ private aircraft movements on publicly available platforms, which enabled us to conduct physical surveillance and subsequently establish the subjects’ new residences, and therefore new jurisdictions for further legal action.
In a separate case, where our client had been defrauded of several millions of pounds by a subject who had then vanished, we were tasked with locating the subject for the purpose of serving them with court documents. Locating the subject proved impossible via open-source research, but we were able to identify an approximate location for the subject in a prestigious London neighbourhood via social media research. A team of K2 Integrity investigators subsequently monitored a number of public places in the area for sightings of the subject and traced them back to a residential address. Through physical surveillance we also obtained evidence of the subject enjoying a lavish lifestyle, and of them having access to significant funds.
In the vast majority of cases, clients approach investigators with a set of predetermined requirements which they believe will assist them in resolving an issue or in advancing their legal claim.
However, when approached by a client with a problem, a good investigator will always assess the situation and consult the client on how best to approach the problem specifically from an investigator’s perspective.
The first job of a good investigator is to receive the full context on the client’s issue, and to fully understand what the client is looking to achieve. Only a human investigator will be able to appreciate all the nuances of a client’s problem, including reading between the lines, and advise them accordingly on how to achieve the best possible outcome.
A comprehensive information download from the client is the essential preparation that ensures investigators can prepare a bespoke strategy designed to deliver the precise outcomes the client is after. An experienced investigator will also instinctively weigh up the costs versus the benefits of any proposed approach and consult the client on the most cost-efficient way to achieve desired outcomes.
In addition to advising clients on the best course of action, good investigators will also be candid with clients in advising against certain actions which would likely be ineffective or even counterproductive.
In a recent case, a client approached K2 Integrity requesting asset tracing to be done on a set of subjects that had sold them bonds which had defaulted. Having identified a number of preliminary connections between the subjects, and their connections to other failed investments, the client believed that they had been defrauded by the subjects. After receiving all of the background to the case from the client, we proposed to the client the first step in the process of recovering the funds: firming up the connections between the subjects and the fraud allegations to strengthen any subsequent legal claim and therefore the chances of recovering the assets through legal proceedings.
Working in Tandem with Legal Counsel
In most matters, the best outcomes for clients are achieved through investigators and lawyers working closely together to develop, or support, an existing legal strategy.
By way of example, asset tracing investigations benefit significantly from coordinating the efforts of counsel and investigators, and asset tracing investigators can be brought in pre-litigation, during litigation, or post-judgment, to maximise the chances of recovery.
An experienced investigator will also be well versed in working across a range of jurisdictions and will have a good understanding of how best to support counsel in different legal systems.
K2 Integrity was previously engaged by the authorities of a country to investigate corruption by several public officials. We began our investigation by mapping the network of assets held by the officials globally, knowing that this would eventually likely lead to a civil claim against the subjects. After an initial asset mapping phase, which conclusively demonstrated a level of wealth for the public officials which was not commensurate with their official incomes, we introduced the client to a trusted law firm, to begin working on a legal strategy for recovering the ill-gotten assets. Following their engagement, we worked in tandem with the counsel to feed them asset-related intelligence on an ongoing basis to build a legal strategy, which ultimately led to assets being frozen in six separate jurisdictions.
Adapting to Changing Requirements
Investigations can evolve rapidly, and human investigators have the experience and know-how to be able to revise strategies and to meet changing requirements at any point of their investigation. This can include, for example, receiving an entirely new mandate from the client, deepening the client’s understanding of a new issue using the existing investigative methodologies, or tailoring the agreed work product to fulfil a new purpose.
In a recent case, the subjects of the investigation were two former employees of our client, a commodities trading company. Following allegations of operating illegal and corrupt schemes, which included operating a sugar trading “side business” as employees of the client and receiving kickbacks from the client’s suppliers, our client referred the case to the local authorities in connection with suspected criminal wrongdoing. In this matter, the client had initially instructed K2 Integrity to investigate the subjects’ alleged illegal schemes, through a combination of open source and human source enquiries. As the investigation progressed and the client engaged legal counsel, it was established that the client was ultimately seeking financial redress from the subjects via civil proceedings. K2 Integrity were subsequently tasked with uncovering assets held by the subjects globally, against which a civil award could be enforced, as well as identifying further details of the subjects’ personal business dealings which involved the above corruption.
Today, artificial intelligence and technology provide human investigators with great tools for running efficient and sophisticated investigations, and these tools will only continue to improve and become more useful. However, human investigators will always be needed to steer these tools, and artificial intelligence is unlikely to ever be able to replicate the human contributions to an investigation, nor to consult clients on how best to approach issues.
- Obtaining information through speaking to people will remain the domain of human investigators, who are highly skilled and experienced at obtaining non-public intelligence via discreet enquiries among relevant sources.
- Although significant strides have been made in terms of information access via public record and open-source research, we have seen that we must remain mindful of the limitations of these as information sources, particularly in certain jurisdictions.
- Surveillance is an investigative strategy that only an experienced investigator is best placed to plan and execute, one who can also advise the client on whether it is a necessary and proportionate measure.
- A part of a human investigator’s role is to consult a client on how to best approach a problem, advising and preparing a strategy. This can sometimes include advising clients not to pursue a plan with which they originally approached the investigator, where this may lead to wasted efforts or even be counterproductive.
- Human investigators recognise that every case is different and can modify strategies to fit changing objectives. This includes their ability to work in tandem with legal counsel to support evolving and complex legal strategies across a range of different jurisdictions and legal systems.