Checking out on people and firms is turning out to be quite a business and, as with almost any kind of services work, a lot of it is being outsourced to India.
The Hong Kong-headquartered Quest Research, a company operating in this space, is ramping up local operations to take care of its expanding business. And a lot of the new business is coming from India itself.
Launched by two expatriate policemen in Hong Kong in 2000, Quest Research is expanding as fast as it can get qualified staff, so as not to compromise on quality.
Scott Graham, managing director for compliance solutions of Quest Research who is based in Mumbai, says, "Business in India is booming."
The company's biggest markets are in India, China (it includes Hong Kong) and Indonesia, in that order.
Fifty per cent of its revenue comes out of work done on Indian businesses, 25 per cent is China centric and the remaining 25 per cent comes out of the rest of Asia.
Globally, Quest Research offers two services - it checks out on people companies wish to employ and it does due diligence on prospective business partners like vendors and M&A probables.
For the latter it offers a product called IntegraScreen.
Around a third of the Indian business comes from Indian owned and managed IT/BPO companies and the remaining from MNCs seeking to do business in India. The former consists of "companies that realize that good corporate governance makes good business sense."
Of the 280 people the company employs, 250 are in India, the rest being in the sales and marketing operations outside India. Mining databases and building proprietary ones, which is what Quest Research mostly does, is carried out almost entirely in India.
In the current year the company expects to clock a turnover of $10 million. It has been making money from the second quarter of its existence and has grown this far without any outside cash from investors like venture capital funds.
Checking out the veracity of what is claimed by job aspirants in India in their CVs is big business for Quest Research because "we get more fraudulent CVs in India than anywhere in Asia," reveals Graham.
When you see the massive ramping up that is taking place in the IT/BPO domains in India, with some companies doubling their staff strength in a single year, it is easy to see why the Indian business of the company is booming.
A captive BPO operation of an MNC in India has to check out the antecedents of every supplying firm.
The areas checked out are transparency, integrity, political connection, business track record and, what is perhaps most important, any involvement in reputational risk.
If it is a prospective M&A counter party, then the due diligence to be conducted is naturally much more rigorous.
The tightening of regulatory provisions through US legislations like the Sarbanes-Oxley Act and the Corruption Act have played a role in creating demand for the sort of services that Quest Research provides.
The increasingly tightening global regulations against money laundering have also raised the scope of the business.
To do its work Quest Research uses proprietary and subscription databases and also government records.
Graham makes it clear that "we only use information available in the public domain as we are not a private detective agency."
Data either taken from an offered CV or sought from the company being screened and then put through data base checks.
As many as 200 databases are used. Checks like those for cross directorships are used to identify linkages with tainted companies.
"Companies which have jumped from one scam to another find it increasingly difficult to hide their tracks."
"We work for more than half the top Indian IT companies and are client driven," says Graham. It is US clients who first used the company's services and once it became clear that they wanted this type of due diligence done, Indian vendors have been following suit too.
Companies that have good corporate governance records and follow transparent practices are chosen by US companies for doing business.
"They won't deal with you otherwise," says Graham.
This kind of due diligence services is a big business globally. Pre-employment screening is a $4 billion industry and anti-money laundering screening is a $6 billion industry. The US leader is Choice Point that has an $800 million turnover.
From the experience of his company, Graham is able to draw useful parallels between India and China.
Corporate information in China, offered by the Administration for Industry and Commerce, is far superior as it is computerised and up-to-date.
But the company's own databases in India are better. US companies find it much easier to operate in the Indian environment though frauds in India are a bit more sophisticated than in China.
A big issue in China is the political risk over which "many have burnt their fingers."
Western companies initially found it easier to get business in China through the political links of partners but then found these partners becoming more and more demanding.
"Today US clients insist that their Chinese partners do not have political links."
More from rediff