Fraud Magazine Interview – Tom Answers Your Questions


Mr. Tie, Enjoyed your article. Informative and very well researched and documented. CASE: Client is a hedge fund investor considering investing in XYZ Hedge Fund.

XYZ’s office proffers resumes for key people at XYZ. Does not this proffering constitute implied consent to verify the contents of the resumes? Without further written consent from the hedge fund soliciting investment funds? Appreciate your take on this. Best regards, Chuck Sullivan Financial Investigations, Inc. Broomfield, CO


While I would need to know a little more detail about your situation,  right off the bat, in the event you conduct ANY type of Consumer Background Check (“BC”) , you must obtain written consent as “best practices”, and in order to be FCRA/FACTA compliant, especially if you obtain credit information, or rely on criminal or civil litigation histories in your decision making process with regard to a “Consumer” (defined as a person).

There is essentially no “implied consent” these days, unless it is [technically] ONLY public record based research that you intend to conduct, however, in a trial setting, opposing counsel is going to assert that you tainted the relationship and failed to give not only adequate notice of the impending background check, but that the results would be used in the decisional process, and the Consumer had no opportunity to refute or explain any adverse information on record, and that cost him money, which the trial is seeking recovery of, and damages as a result, thereof.

This is critical, because the overwhelming consensus of the populous is that a person should have the opportunity to refute inaccurate information contained in their background, or at least be given the opportunity to explain a given situation, if potentially adverse to the candidacy.  This is commonly called “public policy”.

Basically,  if you don’t tell someone why they got rejected, it is ALWAYS looked at as supremely unfair to the candidate, be it a candidate for employment, credit extension, or, as in your case, business association, and;  especially when dealing with the kind of sensitive, privacy-based information that you would want to review and base a decision on.

Even though this is not essentially an employment background check, it is an “association” background check in this context, and requires the same handling as an employment level check, since you will be placing enough confidence in the result of the inquiry to associate with the person being inquired upon.

That said, you can in fact do public record searches without consent, and you can certainly look at the company without any type of consent BUT, (and this is lost on most people) suggesting to a target subject the very concept of even conducting  a background check, by advising that one will be conducted, and thus seeking consent is actually the best initial background check that one can conduct.

If you ever interviewed anyone, (criminally) in your career, you already know that the initial facial reaction to a question actually constitutes the true answer, unless the person is a sociopath.  The same is true when you “pop the [consent] question” – just watch or listen to their reaction, and you will have almost as much of an answer as to the person’s viability as a decent BC will provide you.

In essence, telling someone that you are going to do a background check gives a pretty decent “cold” reading of what you are in store for, and what I am referring to is the three-second rule – if they hesitate for three seconds, you are likely to encounter some problem in their background, which will potentially affect their viability in the scenario that they are being proposed for.

My advice?  ALWAYS tell the candidate that it is your policy that you conduct BC’s on the company AND all of its principals, and seek their written consent.  You will shake the bad guys out of the tree very quickly if you do this, across the board.