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Private Investigation Sector Never Busier As Risks Proliferate
10 July 2023
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. Licences and labour Driving forces
It’s certainly a busy time for , 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.
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 , 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.
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 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.
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.”
“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.
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.
Licences and labour