Laxity boosts crime

Failure to conduct minimal background checks into joint venture partners is costing European companies investing in new markets millions of pounds each year.

A Deloitte & Touche survey of large infrastructure companies across Europe has revealed almost half are failing to research partners or individuals related to their investments.

This is despite the fact that joint ventures are the preferred choice of entering a new market and is an acknowledgement by companies that political instability, organised crime and financial crises in Russia, Asia and Latin America often blight investments.

Emma Codd, head of Deloittes’ business intelligence services unit, said the results showed emphasis was put on financial due diligence at the expense of other risks. These often made a huge difference to the final success of the business.

‘A company could end up buying things that have been set up using proceeds from organised crime. And it is not just in markets like Russia – western Europe has become a target for laundering funds,’ she said.

The research showed 86% of companies which had conducted advanced background checks eventually achieved success. This rose to 91% if they had examined key staff as well. But 40% did not investigate key staff members while 47% ignored their intended suppliers or distributors.


A background check carried out by Deloittes for a client working with a joint venture partner in South East Asia showed the local partner did not own the premises as it had claimed. It also revealed the company’s distribution network was disintegrating and the size of the blue-collar workforce was much larger than the investor had been told. After the checks, the client chose to proceed.

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