Before a major deal, a business owner asked us to check his future counterparty. The contract was worth millions in foreign currency: any mistake could cost the company dearly. The client had no security service of his own, so he entrusted the check to us.
Too Perfect
At first glance the counterparty’s documents looked flawless — not a single error. That is exactly what alerted our detectives. When a major deal is drawn up, there are almost always minor flaws and rough edges, but here there were none at all. That was the first warning sign.
Checking the Counterparty
We checked the company and its founders: we gathered and analyzed open data and brought in our own sources of information. We looked not only at the legal side but also at financial flows, connections and the company’s reputation in the market. In such checks everything matters: how old the company is, who its founders and directors are and how many other firms list them, at what address it is registered, whether it has lawsuits and debts, and whether it does any real work.
The Scheme Behind the Facade
It turned out that the counterparty was part of a fraudulent cash-out scheme. The company belonged to a network of shell firms registered to nominees. Their activity created the appearance of legal transactions, while in fact it served to hide income and evade taxes. We also found other firms in this network that were used to launder funds.
The flawless documents were not a sign of reliability but the facade of a fraudulent scheme.
What Was Avoided
This came as a shock to our client. A deal with such a structure threatened serious losses — up to the loss of his investment and reputation — as well as frozen accounts and lawsuits.
The client pulled out of the deal in time. We gave him a full package of evidence and a report, which he used to justify his decision to his partners. That way he preserved both his money and his company’s reputation.
Check Before You Sign
The larger the deal, the more costly a mistake in choosing a partner. Even if the documents are flawless and the negotiations are going smoothly, it is worth checking who you are dealing with before signing: who is behind the company, what it really lives on and whether there is a history behind it that no one talks about. A shell company can look more solid than a real one: that is precisely where its creators put their effort.