By: Grace Chandonnet, Senior Consultant
Grace Chandonnet
The Helen Brown Group has been discussing the need for due diligence in prospect intelligence in this space for years, and for better or worse, it is still an important topic – maybe more now than ever. It’s a sobering time for nonprofits for a variety of reasons, and if we can proactively avoid partnering with individuals or organizations that could expose us to risk, it is all for the good. It’s always been important to raise the red flag when we come across something negative when researching someone. Considering our 24-hour news cycle and the rapid spread of information, misinformation, and disinformation through both social and conventional media, I think now more than ever we need to keep our due diligence hats on during the course of our work.
Let’s take a look at the different avenues of due diligence, what to consider, and why they are important (and suggest some great resources!)
Source and Legitimacy of Wealth
It’s great to know that our prospect is wealthy, but it’s also important to know a bit about where their wealth came from. Was it through ethical means (e.g., inheritance, entrepreneurship, investments)? Is there any history of corruption, fraud, environmental harm, or labor abuses? Are their business interests in controversial industries (e.g., tobacco, weapons, fossil fuels)? Does the company operate in countries with sanctions or embargoes? Does reported wealth and lifestyle match public records (e.g., real estate, SEC filings)?
Reputational Risk
We need to remember that the reputation of those with whom we partner can and will reflect on our organization’s reputation. We should be paying attention to our prospects’ behavior and what is being said about them. Are there any negative press, scandals, lawsuits, or regulatory actions? Could the prospect’s affiliations be seen as controversial or misaligned with your organization’s values? Have they made statements or engaged in behavior that could reflect poorly on your institution?
Legal and Compliance Issues
We also need to consider any potential legal and/or compliance issues. Do they appear on any sanctions and/or watchlists such as Office of Foreign Assets Control (OFAC) Sanctions List, Interpol, OpenSanctions, the U.S. Department of Justice’s National Sex Offender Public Website, or other sanctions/blacklists? Are there issues with offshore holdings or shell companies – do they or their businesses appear in the Internal Consortium of Investigative Journalists’ (ICIJ) Offshore Leaks Database? Is there any past or ongoing civil/criminal litigation for financial or ethical misconduct, or IRS issues that are public (note: most IRS issues will not be public unless you have access to court records, but federal tax liens on property are public record).
Philanthropic History and Intent
We are going to look at philanthropic history during our research anyway, but we should also do so with our due diligence eyes. Does it feel as though donations have been made for publicity, influence, or tax reasons rather than genuine interest? Has their nonprofit engagement been with organizations that are regarded with respect and not with organizations antithetical to your institution’s mission? Has there been any history of them retracting gifts or not fulfilling pledges?
Politically Exposed Persons
A Politically Exposed Person (PEP) is someone who holds or has held a prominent public position or function, often associated with government, politics, or international organizations. This includes heads of state/government; senior politicians; high-ranking military officers; senior executives of state-owned enterprises; judges, ambassadors, or central bank officials; and/or close associates or immediate family members of any of these. PEPs are not inherently high-risk, but their positions expose them to a higher risk of bribery, corruption, or undue influence, which necessitates enhanced scrutiny.
PEPs matter in our field for several reasons. Donations from a PEP (or associate) may be viewed as an attempt to curry favor, seek influence, or whitewash a public image. Media or public backlash can follow if a donor is later involved in a scandal or criminal investigation. PEPs may have political or ideological stances that conflict with the values of your organization and accepting funds from them could alienate your organization’s existing supporters, staff, or governance. Some PEPs (especially foreign ones) may be listed on sanctions lists or involved in corruption investigations, and donations from sanctioned individuals could trigger serious legal consequences.
You will likely know pretty quickly if the prospect you are researching is a PEP, and if they are, we should hold them to a higher standard of vetting than typical prospects. Use your organization’s protocols for elevated risk prospects. In many nonprofits, this may trigger enhanced due diligence.
When it comes down to it, doing your homework on prospects just makes sense. A little extra digging can save a lot of headaches later and can help ensure that your organization is partnering with people who genuinely support your mission and ethos.
Resource Checklist:
- Interpol Red Notices
- Kindsight (formerly iWave) (charitable giving, capacity scoring, wealth screening)
- Nexis for Development Professionals (property records, negative new search, biographical data, public records, legal news)
- Due Diligence+ (a separate subscription aggregator tool from Nexis for Development Professionals)
- Office of Foreign Assets Control (OFAC) Sanctions List Search
- OpenSanctions
- RelSci (affiliations and associates)
- SEC Databases (company affiliations, wealth)
- Social Media – LinkedIn, Facebook, X (affiliations, interests, activities, opinions)
- Transparency International Corruption Perceptions Index
- S. Department of Justice’s National Sex Offender Public Website
- Additional resources can be found on the Helen Brown Group Due Diligence Resources webpage.
