Harry Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Richard L. Cassin Editor at Large

Elizabeth K. Spahn Editor Emeritus 

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor

FCPA Blog Daily News

« Reoch and Barrett: Time to shift to ‘conduct from the top’ | Main | Federal Court: DOJ free to pursue alternate theories for FCPA jurisdiction »

Scott Shaffer: Human intuition is a valuable due diligence tool

Two days ago, one of my senior analysts burst into my office proclaiming, “You can’t imagine what I found and how I found it!” My interest was piqued so he took a few minutes to explain the situation.  

My analyst found a government connection, which is not uncommon considering the subjects we are often asked to research. But what is uncommon, is how he found the information.  

He had been conducting a rather routine background investigation. All the information was clean and accurate, and aligned with the client-supplied data (identifying information, civil/criminal checks, adverse media, business affiliations, sanction/dpl screening, local intelligence in the given locale, etc.). The standard channels for research had produced nothing unexpected -- no red flags or reasons for concern. But then he came across a podcast given by the principal earlier this year, so he took about 15 minutes to review the video.  

During the introduction, the principal provided a brief bio that matched the resume we were provided by the client. However, during a later segment in the podcast, the principal disclosed a former political position he had held, which was not listed on his application or resume, nor would it have been located during a standard analysis of the business, media, and databases records or through local intelligence. It was only discovered because our team was willing to look at everything, and dig deeper into all available sources.

People often ask me, “don’t you think human analysis investigations will go the way of compact disks, with artificial intelligence and massive databases containing everything necessary to complete a sufficient background check?” It’s situations like the above, which make the human touch necessary and prudent when conducting enhanced due diligence.

Unfortunately, there are no silver bullets when it comes to research. For as many times as red flags are found through local source commentary, they are also found in an adverse media or sanctions/dpl/pep screening. And, occasionally, through reviewing a podcast.

Then, what’s the best solution? It’s a challenge. Typically, the solution includes a combination of several resources. There are a plethora of available databases that contain vast amounts of data on both companies and individuals. They are relatively cheap -- and information is quickly accessible and allows for an almost simultaneous review of data subjects. However, serious limitations exist, and the data is only as good as the available content which the database contains.

Desktop solutions allow for databases and other publicly available information to be reviewed by a trained (hopefully) analyst, whose skill set is focused on research and the ability to sort through vast amounts of evidence in the hopes of locating the proverbial needle in the haystack. More information is analyzed than just what is found in databases. The human element allows for dynamic analysis which can trigger additional areas of research. But, these reports require additional time, lack on-the-ground intelligence, and are only as good as the analyst reviewing the data.

Finally, combining the above two methods with local, on-the-ground research (since we all know that certain records in certain jurisdictions are only accessible by going direct to the source) allows for the most complete profile. It provides direct verification of corporate records and civil/criminal filings and reputational queries and it utilizes a local investigative source who is familiar with the intricacies of that locale. This option may cost more and take more time, but the results are more accurate and complete than the other methods.

Regardless of the risk profile, the level of due diligence and your company’s commitment to its compliance program, there is no way to guarantee that you will uncover all of the potential issues that may arise (see podcast reference above). However, complying with your internal compliance program with a risk-based approach, and analyzing each potential relationship with an inquisitive eye, can provide a substantive argument for the engagement and why you chose to pursue it.

Because the most important part of the story might be waiting just a step or two beyond what is evident and most easy to see.


Scott Shaffer, pictured above, is the Managing Director for the Kreller Group in Cincinnati, Ohio. For the past 23 years he has consulted with clients to address due diligence objectives, customizing due diligence programs for new clients, and analyzing current trends regarding regulatory compliance.

Reader Comments (5)

Very intersting perspective! I do agree the human touch is still important, but my question is how senior should be our team to achieve this level of ability?
July 24, 2018 | Unregistered CommenterIngrid Matos
I strongly believe that human touch and eyes are what it makes a difference, intuition and personal insights are definetely very important!
July 24, 2018 | Unregistered CommenterGraciela Garay
Without facts and data "Human Intuition" is nothing more than guessing. Do you really want to make decisions based on guessing or how someone feels?
July 24, 2018 | Unregistered CommenterJ Farrow
Excellent points and great example demonstrating value of analysts. Analysts are critical to the due diligence process in that they also synthesize the information gathered in order to assess risk in relation to company which is conducting the research.
July 25, 2018 | Unregistered CommenterMark Speck
This is great stuff and so true. Unfortunately most routine due diligence and even some "enhanced" due diligence is hardly more than a check the box formula - this is perhaps inevitable in some situations due to volume. So much gets missed, even by human analysts, due to this mentality. I can count multiple occasions when I found something through a more careful approach that was missed by a previous human in a hurry and turned out to be critical - I'm talking locating a federal fugitive or identifying a possible human trafficker! I think most business minded people are thinking that AI can easily replace humans where a check the box approach is already in use. I will say also, to the commenter above who says that "intuition" is just guesswork - what else is a decision? The whole basis for a decision being required is a lack of complete information. If you have complete information, the decision evaporates into a clear course of action. This is the paradox at the heart of every decision. I could go on, but I'll just say thanks for the post. Great work!
July 25, 2018 | Unregistered CommenterWilliam Weaver

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
All HTML will be escaped. Hyperlinks will be created for URLs automatically.