This is the second blog in a five-part series on the top trends in 2018 that we expect to see driving best practices and priorities across the U.S. and the world in: (1) threat and violence risk management, (2) investigations, (3) security risk management, (4) law enforcement, and (5) private client and family office services.
As transformational years go, 2017 was rather significant. It included not only changes in technology – which are a given these days – but also social changes, such as increased awareness of sexual harassment issues. At the same time, government policy changes, such as the tax bill signed into law late in the year, should also have an impact on how 2018 unfolds from an investigator’s point of view. What else do we anticipate? Here’s our take.
Trend #1: Sexual misconduct investigations will increase across government and business
In 2017, sexual harassment and assault became one of the most talked about issues in our country. We’ll look back on this in years to come. How so many high-profile celebrities, media personalities, politicians and other powerful people confronted a wave of public sexual misconduct allegations. How the #MeToo social media movement caught fire so quickly. How these “silence breakers” were named Time magazine’s Person of the Year.
What are the investigative implications of this movement for 2018? With heightened public awareness, we foresee an increase in sexual misconduct investigations across government agencies and private businesses. More victims will come forward as people continue to speak out publicly. At the same time, companies and government agencies will feel increased responsibility – and pressure – to investigate these claims promptly and thoroughly.
Trend #2: The dark web and cryptocurrencies create new risks
The deep and dark web is a growing and valuable resource for investigators. This is true not only from a law enforcement perspective, when illegal drugs, weapons and human trafficking are involved, but also as major data breaches involving personally identifiable information (PII) threaten the financial security of Americans. Take the recent breach of Equifax, for example.
As awareness of the dark web spreads across Main Street USA, more Americans – prompted by newsletters and professional advice from their experts in security, finance and IT – may begin to consider services and tools that monitor the dark web for their personal information. If that trend kicks in this year, we expect to see a surge in software and solutions that promote self-due diligence to identify the scope of one’s exposure to a host of risks. This due diligence could include monitoring the dark web to avoid falling victim to a PII breach, investigation of misappropriation of trade secrets or intellectual property, and even searching for the spoils of traditional criminal enterprise, such as stolen artwork.
The rise in the use of the dark web for nefarious purposes corresponds, not coincidentally, with the boom in cryptocurrencies like bitcoin. It’s fueled not only by investors seeking a quick return, but also by criminals seeking to profit without exposing themselves to the risk of identification via physical currency or wire transfers. Private equity and other investors and companies seeking gains in crypto and emerging blockchain technologies should be wary, particularly with investments involving initial coin offerings (ICOs). As these new frontiers in currency, investment and trading are explored by governments and investors alike, it’s important to perform due diligence investigations before entering into related business opportunities.
Trend #3: Demand for pre-transaction due diligence is expected to rise
Last year was record-breaking for mergers and acquisitions (M&A). According to a recent Business Insider report, the consensus on Wall Street is that M&A activity will surge even higher in 2018. Goldman Sachs attributes this anticipated increase in activity to the passage of the recent tax law, which includes a dramatic reduction in the corporate tax rate and a repatriation tax holiday for companies with funds overseas, not to mention pent-up consumer demand, according to the same report. Similarly, according to a recent survey conducted by Deloitte, 76 percent of leaders at domestic-based private equity firms believe there will be an increase in both the number and size of M&A activity in the next 12 months.
This likely increase in the number and size of M&A deals is likely to affect the demand for pre-transaction due diligence. Acquiring firms need to not only make sure that the merger or acquisition makes sense financially, but also must investigate both acquisition targets and business partners to make sure the potential risks are assessed prior to a transaction.
Trend #4: Greater corporate transparency is coming, at least in Europe
The publication of the Panama Papers in 2016 and the Paradise Papers in 2017 brought much-needed exposure to the shadowy world of offshore financial accounts and shell corporations. They also provided momentum for corporate transparency efforts in the U.S. and Europe, though the latter is much further along than the former.
In May 2018, the European Union (EU) will put into effect customer due diligence regulations requiring that many financial institutions keep records identifying beneficial ownership of corporations. The move is seen as a major step forward for anti-money laundering efforts in the EU. In the U.S., similar corporate transparency efforts are still in the early stages. As Hillard Heintze Director Adam Zoll discusses in one of his blogs, bipartisan legislation aimed at requiring beneficial ownership information on corporate records has been introduced in both chambers of Congress. Both versions of the bill are currently stuck in committee, but with the backing of key members of Congress, they have a fighting chance.
For investigators, these types of transparency measures serve as critical tools when conducting background investigations, asset searches and other types of assignments that involve untangling a subject’s financial interests.
Trend #5: There’s no end in sight for fake information
“Fake news” was a major buzzword in 2017, and while its use has become heavily politicized, the fact is that it’s never been easier to post deceptive information online in the guise of reliable information, whether it be fake news sites, false business web pages or a phony social media page for someone who doesn’t even exist. Separating fact from fiction and credible sources from misinformation requires not only a discerning eye and attention to detail, but an understanding of research methods and where sources get their information. For investigators, understanding how to navigate sources to find trustworthy information is crucial, and it’s a skill that is only likely to grow in necessity in the year to come.
What’s on your investigative agenda in 2018? What trends are you seeing?
We are interested in hearing how you are preparing for the upcoming year. Over the next few weeks, we’ll be addressing other Top Trends to Watch in 2018 in our other practice areas. Want an automatic alert when the next blog goes up? If you’re not a subscriber already, fill out the form below.