When considering a business opportunity in a foreign country, minimize the risks by performing creative and focused international due diligence.  This process can alleviate unwise business decisions.

The case study for this article focuses on a financial company located in the Netherlands.  The business due diligence investigation noted that the company address was valid, however, further research noted a bus company was located at this address.  In addition, media articles noted that violent protests occurred on the street where the financial company alleged to be located. Database searches noted that the financial company was also registered in Canada, by an unknown Registrant.  To that point, the business address in Canada appeared to be a vacant apartment complex. Additionally, the owner of the company in the Netherlands was utilizing an email address and a website address that were not valid.

This information was promptly communicated to the client, informing him it was not prudent to conduct business with this company since the addresses appeared to be bogus, the email and website were not accurate, and there were violent protests on the street where the business was located.

Is There Conflict?  Check Out the Armed Conflict Database

Is there conflict in the part of the country where the business is located?  Check out the Armed Conflict Database which can generate reports and download data as well as browse year-by-year analyses and fact sheets.  Refer to the map denoted below.

Determine the Terrorism Threat  

Review the threat assessment regarding the city where the company is located by using TRAC, “one of the most comprehensive compendiums of information and analyses of terrorist groups and activities in the world”.  Monitor the Chatter Control Room and the Threat Assessment in the city where the company is located. In reviewing the Chatter Control Room for the Netherlands, the following was located regarding two incidents in Maastritch.  These incidents remove the consideration to conduct business with a company in this area.

March 3, 2018 from Telegraaf

Radical from Iraq arrested for serious violent crime - Netherlands

MAASTRICHT - An arresting team got the 'extremely dangerous' jihadist Mohammed G. out of his Maastricht flat.

March 5, 2018 from De Telegraaf

Man arrested for "serious violent crimes" in his home in Maastritch- Netherlands- 03...

Determine the terrorism threat.  Netherlands faces a low to medium threat of terrorism, primarily from home grown jihadism that has sprung up all over Europe. Further, the free movement across Europe allows these individuals and entities to travel to areas of conflict in Asia, Middle East and Africa for training and to carry out attacks targeting interests, not only of other countries, but also of the Netherlands.

Vulnerability

TRAC also notes the vulnerable cities relative to terrorism.  Review this list before making any business decisions. The vulnerable cities in Netherlands are Amsterdam, Rotterdam, sGravenhage, Utrecht, Eindhoven, Tilburg, Groningen, Breda, Apeldoorn, Nijmegen, Enschede, Almere, Zaanstad, sHertogenbosh, Amersfoort, Maastricht.

Check out the Attacks

Review a list of the attacks in the country before making a business decision. For example, below are a list of attacks in the Netherlands.  

Investigate the Specially Designated Nationals (SDNs)

Identify the risk associating with individuals noted on Specially-Designated Nationals, Blocked Entities List, or other prohibitory laws and regulations.

General Business Due Diligence

  • In the Netherlands, registration in the Commercial Register is compulsory for every company and almost every legal entity. Answers to the following questions can be found:

    • Does the company actually exist?  

    • Is the person actually a principal of the company?  

    • Is it safe to travel to this company?

  • Review commercial registers and search for companies and download official up-to-date company reports, company checks, annual accounts, and company profiles from these official databases.  Search for companies globally and in the European Business Register.

  • Search for a Director of the company.  Search by the person’s name and other identifiers. A list of legal and registered persons is located in the European Business Register.  The database also determines if the person is or has been a Director of a company.

  • Before supplying goods or services, check if the company is VAT Registered and holds a valid VAT number.

  • Obtain a credit report using the commercial registers.

  • Enter the company name in company profile databases to determine competition, financials, and other business information.  For example when searching for 3M Nederland B.V. located at Molengraaffsingel 29 2629 JD Delft Zuid-Holland The Netherlands, Phone : +31-157822333, Hoovers notes that “3M Nederland finds that Post-it Notes work well in any language. The Dutch arm of US-based conglomerate 3M sells the parent's vast portfolio of consumer, commercial, and industrial products, serving markets such as electro/ communications, office, industrial/transportation, and safety. Brands include such household names as Scotch tape, Scotch-Brite household cleaning products, Scotchgard protective products, Nexcare bandages, and Filtrete filters and air purifiers. 3M Nederland operates three manufacturing plants: one in Amersfoort, 3M ECC, which produces heat shrink tubes; another in Breda, 3M Filtrete, which makes filter materials; and a plant in Kerkrade that produces fluorpolymers, elastomers, and resins.”

Check the Media  

For example, ProQuest’s International Newsstream provides the most recent news content outside of the United States and Canada.  The archives stretch back decades featuring newspapers, newswires, and news sites in active full-text format. ProQuest International Newsstream provides information from more than 660 of the world's top newspapers, including The Times (London), The Bangkok Post, El Norte, Financial Times, The Guardian, Jerusalem Post, South China Morning Post, The Daily Telegraph, Asian Wall Street Journal, and the BBC Monitoring series of publications. 

Is the Website Legitimate?

 

Look for the Trust Passport™ logo.   This is an innovative new online identity product that confirms that the website is real and is owned by a legitimate company.  Within a few seconds, this product can determine if links are real and confirm who owns the website.

Check out the Competitors   

For example below are the competitors of 3M Nederland B.V. Are there too many competitors?  

Conclusion

International due diligence is a time consuming process. However, as noted in a Wall Street Journal article on the website deloitte.wsj.com, “There is no law or regulation specifying exactly the process for, or the sufficiency of, international due diligence.”   

The example above provides guidance to performing international due diligence investigations.  The article notes to follow three steps when considering the investigation of a potential international business partner:

  1. Require the business partner to disclose information on a questionnaire.

  2. Use a risk-based approach to verify the information provided and independently identify adverse information.

  3. Take action on any identified red flags.

 

For more information about business due diligence please contact Dr. Kim Miller, Senior Forensic Investigative Analyst at Sobel & Co. (973) 994-9494 or at kim.miller@sobelcollc.com.