Company Profiles
Private Investigation Sector Never Busier As Risks Proliferate
Sanctions against rogue states, threats from kidnappers,
embarrassing social media posts, and crooked staff and
fraudsters create a lot of challenges for private banks and high
net worth clients. Firms which are able to solve these
problems are in demand.
It’s certainly a busy time for Conflict
International, a UK-based organization that was set up in
2008 by Mike LaCorte (pictured) and Jon Fawcett. CI has a core
team of 25 agents in the UK, US, Spain and Cyprus. It draws on a
network of over 100 specialist agents, who operate across various
jurisdictions.
And this is a firm unafraid to make a public noise about the
moves it thinks have to be made, such as making the job of a
private investigator a licensed UK profession.
“The financial, wealth and private banking industry is one of our
core client streams, and demand is rising as digital fraud grows
more pervasive and sophisticated,” LaCorte told this publication.
“We are involved in conducting comprehensive background checks,
verifying identities, and performing thorough investigations into
individuals and entities involved in financial transactions.
Additionally, we play a significant role in the resolution
process, such as locating lost or stolen digital and physical
assets.”
The rise of this sector also shows how wealth management, and the
rising compliance burdens and pressures it comes under, must
often tap into third-party expertise. Dealing with staff
background checks is one example – hiring a rogue or someone with
a spotty reputation can be extremely expensive. Even small lies
or unexplained gaps on a CV can spell disaster. Financial fraud
and problems more broadly are a big cost threat. A report in
late June by Kroll said that 69 per cent of global executives and
risk professionals it surveyed expect financial crime risks to
increase over the next 12 months with cybersecurity and data
breaches as the primary causes.
Licences and labour
Doing all this work is labour-intensive: it requires a
willingness to respect confidential information, persistence, a
keen grasp of psychology, and a lot of common sense. The
role of the private investigator is self-regulated in the UK.
Some bodies, such as the Association of British Investigators
(ABI) offer training and accreditations.
LaCorte, an investigator with more than 25 years’ experience
under his belt, said the sector needs to be officially recognised
as a state-licensed profession. He has been chairman of the World
Association of Detectives.
A decade ago, the UK government introduced the Private
Investigators Bill to weed out unscrupulous PIs and put the
business on a more professional footing. The industry is still
waiting as the bill did not go through. It’s frustrating,
LaCorte said.
“As a business, we are in favour of further regulation and hope
that the Private Investigators Bill receives the credence that it
deserves. Regulated industries and technical standards help
utilise faster economies of scale, strengthens competition,
protects clients, and are easier to export internationally,” he
said.
“Whilst we are taking steps to self-regulate, such as the
recently-proposed Code of Conduct from the ABI [Association of
British Insurers], which has been put forward to the Information
Commissioner's Office (ICO) and will impose a set of guidelines
on all PIs operating in the UK, internal regulation can only go
so far,” he said.
It is easy to see why firms want to have a licensed status, given
the financial size of the PI market globally – worth $18.2
billion in 2022, and forecast to reach $28.2 billion at the end
of 2023 (source: Fact.MR). The US makes up about 35 per cent of
that figure. Europe (exact figures aren’t given) is in
approximately second place, with East Asia in third.
The range and variety of firms in this space, straddling
risk-assessment, private investigation, and the like, is large.
The aforementioned Fact.MR report noted that the private
investigation services market is “unorganized” and there are “no
rules that define the framework to carry out day-to-day business
activities.”
There’s no doubt that much is at stake. Fact.MR said financial
fraud in the US, for example, stands between $60 billion and $70
billion in false insurance claims alone. Businesses come in all
sizes and types. At one level there are firms that provide a lot
of high-level risk assessment and consultancy. Examples include
Kroll, which covers fields from cybersecurity risk to
investigations, compliance and ESG issues (yes, ESG is now part
of the pattern). Another is Control Risks. With the PI field, an
example from the US is IBM Investigations LLP, serving clients in
Arkansas and Louisiana. Another is Apple Investigations, a
licensed firm based in New Jersey.
In the UK, there’s Private Detective London which provides
consultancy, covert surveillance, counter surveillance, corporate
investigations, international surveillance, along with asset and
vehicle tracking, matrimonial investigation, background checks,
and more. An internet search unearths dozens of firms like this.
In the US, PIs are typically state-licensed – more than 40
states, and the District of Columbia, do so.
Driving forces
Recent events, including the pandemic, played a part in driving
demand. An example is the working from home shift accelerated by
COVID-19.
“With the hybrid transition spurred by the pandemic, we have seen
a huge spike in digital fraud, specifically APP [authorisied push
payment] fraud,” LaCorte said. “The multifaceted nature of fraud,
means we are often called in to offer both proactive and reactive
services, such as surveillance, asset recovery, risk management
services, and information security training. The spike of fraud
that we’ve witnessed over the past few years has led to a
significant increase in demand for all of these services.”
“Regulation is on the rise with the Payment Systems Regulator [in
the UK] proposing to give individuals better protection against
APP scams. However, we are also slightly concerned that this
could encourage further fraud and we somewhat expect that we will
need to provide additional support in this space in the future,”
LaCorte said.
LaCorte said the structure of CI is designed to give wide
coverage of expertise where it’s needed.
“Through service-level agreements we can tap into a wide web of
expertise when needed, ranging from specialist forensics, data
analysts to accounting and auditing specialists. As such, we very
much have boots on the ground in nearly every jurisdiction,” he
said.
CI has an advisory board that oversees the operations of its team
and network of SLAs.
Digital origins
LaCorte said that when the firm was founded in 2008 – the year of
the global financial crisis – he had noticed a “huge spike in
demand for more in-depth pre-employment screening and background
investigations."
“We developed the first-of-its-kind tool to be harnessed by
individuals concerned by their social media history or employers
looking to improve their due diligence,” LaCorte said.
“Interestingly, teachers were added to the list of professions
being asked to provide social media handles when applying for
jobs at schools earlier this year. Given most people who have
social media accounts are likely to forget what they wrote five
or 10 years ago, we believe the tool can be used collaboratively
by employers and individuals to work together to identify any red
flags that can have a direct and damaging bearing on an
individual or company's image.”
Talent
“Training is dependent on the position, but we typically look to
hire people with backgrounds in the PI sector or those with legal
experience as this aids understanding of the court system,
litigation and data management and data protection. Individuals
can also work towards various accreditations throughout their
time with us,” LaCorte said.
AI has a role but human talent is essential.
“Digital PI services such as social media background checks,
fraud investigations, mobile forensics and penetration testing
are in demand and most firms offer these services. But given AI
is rapidly evolving, there is a shortage of talent when hiring in
this space and we have our work cut out to keep up with it,”
LaCorte said.
“As AI and the digital landscape evolves, the skill divergence
between experienced on-the-ground investigators and younger
investigators who have strong digital skills is widening. We
pride ourselves on traditional gumshoe investigations services,
getting out and speaking to people, taking statements and making
enquiries in the field. It is easy to uncover someone’s digital
footprint through a laptop, but we believe human interaction and
other traditional techniques can be equally, if not more
effective.”
With regard to other threats, LaCorte talked about problems in
growth companies and those with “new money.”
“If a business is experiencing a rapid expansion in a short
period of time, we often find that their infrastructure and
compliance standards are lagging, creating significant gaps in
their information security and recruitment policies,” he said.
“By skipping risk management and failing to develop robust
compliance policies, these companies are often exposing
themselves to a host of issues such as data fraud and theft. In a
lot of cases, we have even seen them hire undercover staff from
competitors, due to poorly thought-out rapid recruitment drives,”
LaCorte added.