Due Diligence and its Aspects

Just to start out, each of you has probably heard that “high yield” means “high risk”. Programs generating high returns are normally involved in risky and volatile fields of capital management, such as currency operations, stock exchange, sports betting, metal trading etc. It is clearly understood that safe investing is not the issue in this case (except for very few programs with unique business concepts, proven by years of experience). The first thing you need to be aware of is that there is always a chance to lose part of your money, to receive lower profits than you expected or to face a delay in payout for whatever reason. Nevertheless, it doesn’t happen at the same time with all programs, – so if you have diversified well, it will not really matter if one of, let’s say, ten programs from your portfolio is undergoing through shortcomings of some sort.

The problem is to make sure that all of the programs you are invested with are real businesses instead of being mere pyramid schemes, where returns are paid from the investments of new members, and when the pyramid reaches its peak (in other words, when its admin decides that he’s got enough money to retire), it collapses and you are left with nothing in the majority of cases. The sole of this trick is based on the fact that most e-currencies offer anonymous and irreversible transactions. It means that even if you complain to their support with a claim stating that “an account holder # XXXXXX has scammed you off $NNN USD”, you will receive a ridiculous response advising you to consult legal services in your country of residence or to obtain a court subpoena for further investigation to be executed. Certainly, you will most likely choose not to do it for one simple reason – the services of a lawyer will cost you much-much more that the money (normally, a few hundred bucks), which you have invested with that program. Even if you turn out to be persistent enough and contact the appropriate law enforcement agencies, it will not help you in any way, since the scammers use fake names (or stolen identities, just the way it was in case with “Intellekt Kapital” – a huge scam, run from Germany. Hanover police proved to be unable to catch the crook behind it, since he was using the name of another person who has never even heard of that program). Hence, it is better to avoid scammers than to go after them once you lose your hard-earned money.

What are the ways of verifying the validity of a particular program’s business? Ideally, it is a personal meeting with its administration where you can ask any questions, check out the original registration and identification documents and even take some pictures. But what if you live on different continents and a plane ticked would cost more than the total amount of your investment with this program? In this case we would suggest you use some of the recommendations we are about to give you in this article.

When it comes to online investing, the first thing you should do is to check out a program’s website. Pay special attention to its design. Is the program using a primitive template with a standard collection of FAQ (Frequently Asked Questions) and senseless modalities (such as “backed by Forex”, “experienced traders”, “corporate backing”, “inner workings”, “working behind the scenes” etc) in the explanation of its business concept, with no actual names and contact details being specified? If so, just pass it.

Another important step is checking the domain registration data of a company’s website (also known as “WHOIS data”). Actually, it can tell you much more than you would ever expect. The best way of obtaining this data is going to http://www.dnsstuff.com or http://www.whois.wsand typing the address of the program’s site. Once you hit “Enter”, a complete list of contact details will be displayed on your screen.

First of all, it’s the name and the contact details of the registrar. For instance, if an allegedly large and credible international stock trading company with a fancy name is using a cheap web-hosting service, located in one of the “third world” countries, this fact is definitely worth giving it a thought.

Secondly, you should pay attention to the dates of domain registration and expiration. If a company says it has a few years of experience in working with online investors, but their website domain was registered only a couple of months ago, it is obvious that they are lying. Alternatively, if you have just read an article of theirs about the program’s long-term plans for the future, and then you see that their domain registration expires in less than half a year, the chances are that it is nothing but another scam.

Thirdly, it is the actual contact details which are part of the WHOIS data. They normally include an e-mail address, a physical address, and a telephone number. You might be willing to give a call to the number specified to make sure it’s not made-up and really belongs to the person listed there.

Once the WHOIS check-up is complete, you can move on to the verification of the company’s documents. There are three basic types of documents to be verified: registration certificate, trading history or copies of contracts, and bank reference letter. Once supplied with these documents, you are ought to contact their issuer in order to confirm the validity of these documents. The name of an organization/agency which has issued a particular document must be specified on the document itself. Then you just enter it into a search engine and look for a phone number or e-mail address of the issuing institution. It would be best to provide them with a faxed or scanned and e-mailed copy of the document to ensure the most precise verification (quite often companies have similar names or even worse – use other businesses’ brands without their permission). In case an investment program has provided you with a weird registration document compiled in a foreign language, do not hesitate to ask them for a copy of their bank reference letter. Even the smallest financial institutions involved in international banking are listed on the Internet, altogether with their contact information.

The third stage of Due Diligence is a personal meeting with a program’s staff (if they agree, of course). In this case it would be good to invite a friend who is a lawyer or a businessman to go with you. That way they will not be able to lie about their business activities or past performance.

In conclusion, we would like to advise you not to invest what you cannot afford to lose and to diversify between five to ten different programs. Also, remember to take your initial deposit out as soon as possible, and re-invest some part of your profits. If you follow this strategy, you will never loose any money, no matter what the outcome is going to be like.

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