Criminal Records on Background Checks: How They Impact Investment Decisions

The integrity of organizations and their personnel can be a key indicator of the success of a potential investment opportunity. Consequently, a criminal records search as part of a background check on possible business partners, fund managers, or a company’s executive management is a crucial part of the pre-investment due diligence process. By gaining transparency about an individual’s criminal background, you can properly consider the risks and liabilities that could impact your final investment decision.
By Tali Bartkunsky
August 8, 2022

Criminal records on a pre-investment background check

Running a criminal background check is a given when it comes to hiring a candidate. An employer needs to know if the potential hire has a criminal history to safeguard their other employees, company assets, and clients, as well as maintain the company’s reputation.

Likewise, an investor needs to protect their capital, ensure that they can trust the individuals responsible for the success of the investment, and keep their reputation in good standing. As a result, a criminal records check is viewed as a vital part of the pre-investment due diligence process, providing transparency that an investor requires when investigating the people involved in a business opportunity.

What is included in a criminal records check?

Here are some important databases that may be searched for criminal records:

  • County criminal history—County courthouses document all felonies and misdemeanors that were tried in local jurisdictions. Many of these records are available online, or a court runner may be sent to retrieve certain files when necessary.
  • Statewide criminal history—Statewide criminal checks vary in available information depending on the state, but ultimately the databases search all counties in a state for any criminal records. These records are available on state courts databases, or a court runner may be sent to retrieve certain files when necessary.
  • Federal criminal history—Federal databases, such as the Public Access to Court Electronic Records (PACER), will report any violations of federal criminal laws from a search across all federal courts.
  • Sex offender registry—A search of registered sex offenders.
    Criminal watchlists—In addition to criminal legal records, criminal watchlist databases can also be searched in a criminal check.

The difference between criminal and civil cases

A case will be categorized as civil or criminal depending on the nature of the argument.
Civil lawsuits are a result of one party disagreeing with another, while a criminal charge is a formal accusation against an individual for allegedly committing an act that is against the law.

Here are a few common examples of criminal offenses:

  • Assault
  • Disorderly conduct
  • Substance abuse
  • DWI
  • Forgery
  • Securities fraud
  • Tax fraud
  • Wire fraud
  • Counterfeiting

International criminal records check

When it comes to conducting global background checks, criminal checks will differ across jurisdictions. Given the differences in privacy laws, legal record processing, consent requirements, and the availability of criminal records in each country, conducting an international criminal records check comes with additional challenges.

Global criminal background checks might differ across countries and jurisdictions

One of these challenges is that conducting a criminal check can be more time-consuming. Given the organizational and legal differences between jurisdictions, gathering and reporting the records can take longer. For example, legal record searches in some countries need to be done at local police stations where records aren’t kept digitally, which leads to longer turnaround times.

Another challenge can be the translation process when criminal records are not in English. A background check provider must have the proper resources and tools to ensure that the information is correctly translated. This, too, may lead to a longer turnaround time.

International criminal watchlist databases, such as the Inter-American Development Bank Group’s list of Sanctioned Firms and Individuals or the World Bank List of Debarred Firms and Individuals, must also be searched on top of a criminal records check. In addition to standard international regulatory databases, there are also more country-specific regulatory searches that should be checked.

The impact of criminal records on investment decisions

Measuring the quality of the individuals involved with a deal provides invaluable insight into the prospect of a positive or negative partnership. For allocators seeking a trustworthy fund manager, asset managers researching potential ventures, or any type of investor pursuing a lucrative opportunity, a criminal record can present certain reputational or behavioral risks that should be taken into account.

When evaluating the subject of the background check’s criminal history, bear in mind some of the following considerations:

The charge and the final verdict—Make sure that you understand what the subject was accused of by reviewing the docket carefully. Throughout the proceedings, it’s possible for a serious charge to be reduced to a misdemeanor. On the other hand, it’s also possible that the subject was convicted of some or all of the allegations. The ultimate ruling may affect your judgment of how relevant the criminal record is to an investment opportunity.

The sentence—The penalty of a criminal conviction could range anywhere from a monetary fine to jail time, which may present the risk of reputational damage if a deal were to be made with that individual.

Recurrences—If the subject has been involved in multiple criminal cases, this behavior pattern could reflect their character and integrity. You may want to consider whether or not this individual would be a suitable match for a potential business venture.

Intelligo leverages technology for expansive criminal records coverage

The significance of AI and automation can refine the operational due diligence process to broaden the scope of coverage by including more databases and sources. Given that a manual search is bound by natural human limitations, augmenting internal systems to streamline tasks can achieve a more comprehensive criminal records search.

Intelligo’s proprietary algorithms perform live and database searches on criminal records. The data is run through our analysis engine, and only the relevant cases are extracted. Adverse or significant events are then flagged, allowing customers to lock in on critical results quickly.

With access to over ten thousand state and county-level courthouses, Intelligo’s AI-powered background intelligence platform can promptly perform a search of national databases for criminal records, including misdemeanors, felonies, or traffic offenses. Federal criminal records are also included in this extensive search, as well as criminal watchlists and registered sex offenders.

A dependable, factual, and transparent ODD procedure is essential, especially one that can deliver results promptly. AI has been instrumental in improving accuracy and comprehensive coverage for criminal records, ensuring complete transparency. Intelligo provides investors with all the information they need to know before moving forward with important business decisions.

Knowing all the facts from the start

When it comes to determining an individual’s integrity, it’s crucial to evaluate his or her background and identify any red flags. Without a comprehensive criminal records search, executives and firms can fall prey to a lack of transparency. Whether an investor is vetting a potential business partner, fund manager, or a company’s management team, they need to be able to trust the people that will be responsible for the success of an investment.

You may also like:

Operational Due Diligence: 7 Essential Aspects You Need to Know

Operational due diligence is crucial for uncovering potential risks and protecting investors from financially devastating outcomes. When it comes to the pre-investment investigative process, company background checks that include these essential aspects will allow stakeholders to rest assured that their investment is in good hands.

read more

Adverse Media: Why No News Is Good News

In the world we live in today, the media controls the narrative, and thus, public opinion relies significantly on media portrayal. As a result, any news regarding an individual or company that’s presented in a negative light can have serious reputational and financial implications. This is why it is essential for due diligence background checks to cover adverse media. However, while technology has made global news more accessible and readily available, it has also made it easier than ever for fake news to spread.

read more