Maldem Investigations - Private Investigations agency in Ottawa



A local retail company hired a Private Investigator to conduct verifications (Due Diligence) on a potential new supplier (Supplier A), after they failed to locate information, such as website and product/services description, normally expected to be found online for a legitimate business.

The lack of information (Red Flag 1) was a concern however, the client was intrigued by the new supplier after they offered interesting terms and prices that were significantly lower than those of other suppliers in the area (Red Flag 2). The client did not want to pass up on such a good opportunity, in case the supplier was legitimate and decided to investigate the company further to evaluate potential risks and make a decision.

Provided with only the business card information (name of the company, phone number, and the name of the representative) that was given to the client by the supplier, the investigator started the preliminary research phase of the investigation. Just as the client stated, no information was immediately located regarding the company in question while conducting basic web queries. However, upon verifications in Corporate Registration databases, business registration documents for the company were found.

The documents revealed the name of a director with a registered home address and also identified the fact that the company was only recently established (Red Flag 3). Further verifications on the name and the address of the director revealed other associated companies which were also only recently registered (Red Flag 4) and did not show clear information about the nature of their business (Red Flag 5).

While it was possible that a new and legitimate company (that did not yet set up the appropriate websites to showcase their products and services) was trying to attract new clients by offering exceptional deals at discounted prices, this scenario was highly unlikely and thus, a recommendation was made to the client not to proceed any further with the business relationship until additional information became available (either from the supplier himself or through other investigative means) to disprove and/or address the identified concerns.

Still interested in pursuing the possible lucrative partnership (without alerting the supplier about the Due Diligence investigation in progress) the client opted for the Private Investigator to conduct surveillance on a warehouse that was linked to one of the associated companies in order to identify any derogatory information or additional red flags.

Surveillance on the warehouse identified several large delivery trucks coming in, but with those trucks belonging to big transport companies, and without shipment manifests (which are not accessible to a third party), this observation did not provide any information on the suppliers or products that were delivered.

On a couple of occasions, smaller delivery vans with company logos were seen on the premises. Following this only possible lead, the investigator was able to track down the company that made the deliveries, which turned out to be another supply company in the area (Supplier B).

Following the acquired information, and through extensive open-source research, the investigator was able to find foreign news articles and cargo inspection reports indicating that Supplier B had past dealings with an international company (supplier C); which in turn, was sourcing materials and products from sanctioned countries (involved in human rights and labor laws violations).

It was, therefore, deemed possible that the reason the Supplier A was able to offer competitive prices, was because the products were obtained, partially or fully, from supplier B who very likely (based on their connection to Supplier C and the fact that they opened a number of companies to act as additional layers for the purpose of concealing the origin of the merchandise) obtained those products from sanctioned entities/ countries.

This is a common strategy (known as “layering”) in money laundering cases, where entities are established with the sole purpose of creating additional barriers (layers) to make it harder to track the origin of illicit funds. In this case, it was possible that the same methodology was applied to conceal the origin of products; and the client, if they decided to acquire products from this supplier, could be involved in the “laundering” scheme which could have legal and reputational impact on the company.

While the client was positioned far away from the illicit source of the products, and it wasn’t confirmed that the illicit products were the same ones that the supplier was offering to them; the mere possibility of such occurrence, combined with having a relationship (within company’s supply chain) to a supplier that had ties to sanctioned entities, represent major risks to businesses that care about their reputations and want to avoid potential legal problems.

When numerous red flags appear on the radar, there is most likely a good reason to be extra cautious and take additional measures to protect the company. This is a perfect example of how a supply chain Due Diligence can work to identify potential risks for the customer and provide information that will allow business owners or directors to make informed decisions and reduce the risks of fines, financial loss, negative press exposure, and reputational damage.