How to Vet a Foreign Investor Before Signing an MOU

A memorandum is not binding in the way a contract is, which is precisely why it gets signed before anyone has checked. Here is the sequence that fits in the time available.

Memoranda of understanding get signed quickly because they are framed as non-binding statements of intent. The reputational commitment is immediate and public regardless, and unwinding one is expensive. The verification below can be completed in days, not months.

Step one: pin down who is actually signing

Obtain the exact registered name, registration number and jurisdiction of the signing entity, plus the same details for any parent named in the pitch. A pitch that names a well-known group while the signature block shows an unfamiliar vehicle registered elsewhere is the single most common structural warning sign.

Then confirm the entity at source. For UK entities that is Companies House, free and searchable. For African jurisdictions see company verification in Africa.

Step two: read the filings rather than the certificate

Incorporation date, filing history, accounts, officers and changes of name tell you more than any certificate. Specific things to note: incorporation shortly before the approach, a sole director, dormant or micro-entity accounts inconsistent with the stated investment scale, a registered address shared with a very large number of companies, and repeated changes of company name.

None of these prove anything on their own. Several of them together, against a proposal in the billions, describe a mismatch that has to be explained before signature.

Step three: test the money

Ask for the funding structure in writing and verify it independently. Named financial institutions should confirm the relationship directly to you, not through the counterparty. Completed projects should be confirmed with the entity that commissioned them. Where the investor claims regulated fund status, verify it with the regulator in question.

Documents that are not verification: unnamed "capital partner" letters, comfort letters that the issuing bank will not confirm, screenshots of account balances, and blockchain or bond instruments described in terms the country's own central bank cannot recognise.

Step four: screen the principals

Run directors, beneficial owners and intermediaries against OFAC, the UN consolidated list and EU measures, across name variants, and check ownership as well as designation. Add litigation, insolvency and regulatory enforcement searches in each jurisdiction where the principals have operated.

Step five: check the pitch against known patterns

Compare the approach to documented cases in our fraudulent-pitch register, and to red flags in a foreign investor pitch to government and the MOU scam new governments keep falling for. Recurring features include unsolicited approach, urgency tied to a political date, insistence on exclusivity, a request to sign before diligence, and any advance payment however it is labelled.

If a memorandum has already been signed and concerns have emerged, what to do after signing an MOU with a questionable investor sets out the sequence.

Step six: write down what was verified

Record each finding, its source and the date. The file is what allows an announcement to describe only what has been established, and it is what protects the officials involved if the transaction is later examined.

Next step

Order a report on the counterparty before the signing date, not after it.