The escalation of the conflict in Ukraine has had economic consequences for Russia, and some experts think that the effects have had a negative impact on Western economies as well.  One industry is doing well given the high risk, or at least the high perceived risk in Russia and the Ukraine. Professional private investigators in Moscow and St. Petersburg have reported a steady increase in due diligence cases.  With so much negative media concerning Russia and the sanctions, the perceived risk is higher than ever.  More companies and investors need evidence and risk mitigation services prior to accepting a Russian deal these days.  Russian due diligence services are in high demand.

The United States and the European Union have established a number of sanctions on transactions with Russian companies and individuals as a way to put pressure on Russia´s incursion into the Ukraine. However, Putin doesn´t seem to be backing off.  Over time, the sanctions have increased and Russia´s economy has been declining, but Vladimir Putin´s mind remains unchanged. Long-term sanctions could be fatal on a global scale, and every day that passes by is getting us closer to a global crisis. Investors in the Russian economy are now more concerned about negative consequences, given the high geopolitical risk and the impact of the sanctions, sparking the need for more comprehensive investigations that can shed light and evidence on companies and individuals.

Private investigators in Moscow have seen a rise in due diligence investigations as a result of the uncertain environment.  Plunging oil prices triggered the creation of fake companies supposedly trading oil at ridiculous prices, and they were responsible for an increase in fraudulent deals over the last few months. So besides the sanctions and the political tension, this is a moment where all the alarms have gone off in Russia and it´s time to be more cautious than ever.  Numerous false companies and fake websites have been established offering attractive investment opportunities, getting it at ground zero, and selling commodities at below market, and so on.  Great opportunities do exist in Russia and the Ukraine, but sifting through the fraudulent offers is no easy task, say investigators.

Many influential business people and companies have been placed on the “freeze list”, which establishes that no funds or economic resources shall be made available, directly or indirectly, to the people or entities associated with those in the list. This fact changes the landscape of doing business for anyone involved in commercial deals in Russia, making investors re-evaluate with whom they´re doing business. Information about the ownership of Russian companies is not publicly available in most cases and will very often be in Russian only. Therefore investors and businessmen are relying on private investigators who are on the ground and have the know-how to investigate the subjects involved.

Currently it is extremely important to assess whether establishing or keeping a business relationship in Russia may affect a business. Companies need to perform due diligence in Russia to investigate intended transactions and counterparts and ensure that sanctions do not apply. Otherwise, they could get in trouble for being negligent and not complying with the regulations that the sanctions have imposed.  Essentially, the sanctions have created more confusion and lack of transparency, making it harder for outside investors to enter the Russian market, even when opportunities exist.

A proper due diligence investigation will provide enough information to be clear about what is going on along the entire value chain, minimizing any risks.  Investigators very legal registration, physical offices and operations, reputation and ownership, check for any history of fraud and litigation, and obtain independent references.  Due diligence can also verify assets and products, etc.

Many companies still continue to run business in Russia as normal, without any changes, or are trying to find a way to elude the sanctions and continue with their plans and projects. Every corporation knows its business strategy very well, and maintaining the relationship is an option too. However in those cases it is a must to monitor the situation regarding the sanctions to avoid any misrepresentation.

Overall, the situation in Russia deserves to be analyzed and investing requires verification and due diligence.  Going it alone, or without verifying can be a dangerous game to play with serious consequences.  But, given the limited opportunities in the global market, investigators say Russia should not be ignored, rather verifying is the cost of doing business in Russia at this time. Clear evidence is the only way to guarantee that investors in Russia will be safe and avoid fraud.

Is your company considering doing business or hiring in Russia?  Contact us!

C. Wright
© 2015 Russia PI™

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