Due diligence of chinese clients for investment migration programs

In the US alone, Chinese immigrant investors constitute almost 85% of all EB-5 allocations[1]. By the end of August 2017, 3,339 overseas Chinese fugitives were captured from more than 90 countries, recovering around USD 1.41 billion, with 628 of these being former officials[2]. As such, it is imperative to conduct robust investment immigration due diligence on potential Chinese immigrant investors to verify their integrity and assure their wealth was not attained through criminal means, protecting the receiving government from unintentional money laundering.

How influential is the individual, what is their track record and how have they attained their wealth?

A typical public-level review of due diligence on a Chinese individual may involve the following sources, verifications and processes:

  • Business Interests and Source of Wealth Verification
  • Company Records
  • Databases (Media, Industry, Blacklists)
  • Media & Internet Searches
  • ID Verifications
  • Regulatory Information
  • Civil Litigation
  • Shareholder Information
  • Employment, License and Professional Verifications
  • Reference Checks
  • Site Visits
  • Cross-Referencing of Information Sources

Given the intricate ties between Chinese business, government and influential individuals, an individual’s corporate and governmental connections must be researched. Public records from government databases, such as those available at local AICs (Administration for Industry and Commerce), form the foundation of due diligence reports when coupled with media and internet searches. Civil litigation records are also crucial data points should an individual have previously served as a defendant or plaintiff.

China-specific databases like Wisers, which covers media and industry, often provide higher quality information than global databases. It is similarly important to search Chinese government blacklists that document individuals and companies associated with corruption. However, these should still be supplemented with global sources such as Amnesty International or Human Rights Watch to understand risk holistically. Local information searches must be conducted in Chinese by trained professionals fluent in the language. For example, locating a specific individual when there may be thousands of others with the same Chinese name is extremely difficult for non-fluent speakers[3].

Once all information has been gathered, cross-referencing reports and various sources can bring insight into the individual should any discrepancies arise between the sources.

With recent Chinese data privacy reforms, what is publicly available and what can be legally accessed for research must be distinguished. For example, financial information about an official from tax authorities may be available, but it is often illegal to access that information for due diligence.

 

Author: Michael Cheng, General Manager Due Diligence Operations, Blue Umbrella, China

 

[1] https://www.theguardian.com/us-news/2017/apr/07/immigrant-investor-program-eb-5-trump-xi-jinping-meeting

[2] http://news.xinhuanet.com/english/2017-10/10/c_136669691.htm

[3] http://www.theworldofchinese.com/2014/07/the-most-popular-names-in-china-not-a-john-smith-in-sight/

 

Source:  http://investmentmigration.org/articles/robust-investment-immigration-due-diligence-china/



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