What the Michael McMahon case reveals about KYC failures in cross-border investigations
By Matthew Spaier
The recent conviction of Michael McMahon, a retired NYPD sergeant who transitioned into private investigative work, has drawn renewed attention to the legal and operational risks involved in international investigations. McMahon was sentenced to 18 months in federal prison after being found guilty of acting as an unregistered agent of a foreign government. The case forms part of a broader response by United States authorities to activities associated with China’s Operation Fox Hunt.
Operation Fox Hunt is a campaign by the Chinese government aimed at locating and pressuring Chinese nationals living abroad who have been accused of financial crimes. Between 2016 and 2019, McMahon was retained to locate Xu Jin, a resident of New Jersey, along with his family. Believing he had been contracted by a Chinese construction firm seeking to recover misappropriated funds, McMahon conducted surveillance, accessed personal data through law enforcement databases, and provided information that was later used as part of a coercive campaign.
He received approximately $19,000 in payment. It later became clear that the activity had been directed by agents of the Chinese state, and that McMahon’s work had facilitated a foreign operation without the required legal disclosures.
This case illustrates the importance of conducting comprehensive due diligence when accepting international instructions. Without a clear understanding of who is providing the instruction and what the true objective may be, investigators risk becoming entangled in legal violations, even in the absence of intent to deceive. In this instance, the failure to identify the connection to a foreign government resulted in a criminal conviction under the Foreign Agents Registration Act (FARA).
FARA, enacted in 1938, requires individuals acting on behalf of foreign principals in political or quasi-political contexts to register their activities with the United States government. The law applies regardless of whether the agent is formally aware of the foreign interest involved. As such, any failure to register may be treated as a violation, even if the individual believes the work is commercial in nature.
This matter has also drawn attention to the legal and ethical boundaries involved in surveillance and data gathering. Investigative techniques involving personal information or government databases must be conducted within the limits of applicable laws and with a clear mandate. Without this, there is significant risk of both legal exposure and reputational damage, particularly when working across jurisdictions.
Authorities, including the FBI, have encouraged investigative professionals to report suspicious activity involving foreign interests. Structures have been put in place to support reporting and reduce the likelihood of experienced practitioners becoming inadvertently involved in unlawful or state-sponsored operations.
McMahon’s conviction also serves as a reminder that professional reputation or law enforcement background does not provide immunity from legal consequences. Experience is no substitute for a clearly defined and consistently applied compliance process.
Within the international investigations sector, firms have responded to these developments by strengthening internal governance procedures. At Conflict International, a formalised onboarding protocol has been established to assess each instruction against legal, ethical, and geopolitical criteria. This process includes a review of all parties involved, the origin of the enquiry, and the stated objectives. The framework incorporates compliance with the General Data Protection Regulation (GDPR) and adherence to the Information Commissioner’s Office (ICO) Code of Conduct.
This approach ensures that the firm’s operational practices remain within the boundaries of international regulatory standards, while also offering clients assurance that their cases are being handled responsibly and lawfully. In an increasingly complex global environment, these measures have become essential for maintaining professional integrity and legal security.
The McMahon case presents a clear example of how even routine-seeming instructions can carry substantial hidden risks. Investigative agencies operating in international or high-stakes contexts must apply robust scrutiny and maintain a clear, documented compliance framework to avoid exposure and ensure lawful conduct in every engagement.
Matthew Spaier is Vice president of Business Development of Conflict International’s US Office. He is the Chairman of the Associated Licensed Detectives of New York State and serves on the Board of the National Council of the Investigation and Security Services. He can be reached at [email protected].