Compliance & Ethics
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The Diligent team
GRC trends and insights

Risk Intelligence Data: Essential Foundations for Effective Compliance

October 24, 2023
0 min read
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Russia’s invasion of Ukraine in 2022 prompted the rapid introduction of sanctions designed to put international pressure on the aggressor by limiting its economic power and influence. Indeed, the pace at which sanctions against Russia were implemented, then continuously updated, is a testament to how the overall sanctions regime is evolving – and accelerating. In the UK, for example, the events proved a catalyst for sanctions reforms, with legislation changes passing through parliament in a record 15 days from first publication to Royal Assent. Following the invasion, businesses worldwide had to urgently review their links to Russia and act to limit exposure risk, terminating activities and relationships where necessary in order to comply with the sanctions. 

But while this was a relatively rare situation, it is just part of the challenge of compliance with a catalogue of national and international regulations designed to prevent activities from money laundering to modern slavery, bribery to terrorism. And, in today’s volatile and intense environment, it is not just regulator and government pressure that companies face; there is also significant pressure from customers, employees, and investors, among other stakeholders, for businesses to avoid doing business with individuals, organisations, and governments that are not acting ethically. Businesses found to be engaging with unethical entities can suffer irretrievable reputational damage and lost revenue as a result.

Companies also need to monitor the health and performance of key partners in their supply chain, to minimise the chances of disruption. Identifying issues in key suppliers early puts businesses in a better position to support partners or make alternative arrangements should the need arise.

Knowledge is power – from data to insight 

Conducting regular due diligence on partners, suppliers and customers is a considerable, but important, task. There is an immense amount of information available through public websites, news webpages, databases and more, but it is impossible for an individual or even a team to collate, curate, and analyse it all to get any meaningful insight.

This is where the power of artificial intelligence helps. By using AI to refine, conduct, and collate search data, due diligence teams can cut through the noise and limit false positives to get the insight they need to make decisions to manage compliance risk. In this way, basic “data” becomes actionable “intelligence”.

Key areas that companies need to monitor include:

  • Politically Exposed Persons: Is a proposed business partner or supplier in a position of power or influence that could make them more likely to be involved in or exposed to activities such as bribery or other corrupt activities? Examples include senior politicians, diplomats, and government officials. By identifying people who may be politically exposed, the business can ensure it is not unknowingly associated with unwelcome activities. It is critical, however, that the data used to make these judgments is accurate, complete, up-to-date, and unbiased.

  • Sanctions: The list of official government and international financial sanctions against individuals and organisations changes frequently, meaning companies must regularly verify whether they are complying with the latest information. Manually checking every national and international regulator’s sanction list is time-consuming and inefficient and an automated sanctions monitoring solution is far preferable to avoid errors and oversight.
  • Watchlists and blacklists: these lists are published by various entities including financial authorities, law enforcement agencies, national and international investigation authorities and many more. The aim of watchlists and blacklists is to alert companies to people who have been implicated in crime including white-collar crime, terrorist activities, money laundering and corruption, as well as those under arrest warrants and those who have been disqualified from holding director positions. Again, it is critical that such information is accurate and defensible, for companies that need to justify the decisions they make as a result.
  • State-owned enterprises: Know Your Customer (KYC) and Know Your Partner (KYP) compliance processes require companies to be aware if the entities they are contracting with are partially or fully owned by states. Research indicates that state-owned enterprises organisations may be at increased risk of involvement in unlawful behaviour, hence there has been a growing focus on vigilance around relationships with them.

The above are key areas that should be regularly monitored as part of corporate due diligence and risk management activities, with screening tools properly calibrated in respect of the sanctions and regulations in place in their territory.

It is also important for businesses to stay up to date with negative news relating to key partners and suppliers. The 24/7 digital news cycle means that there is a constant stream of information that can provide an early warning when companies suffer financial distress, reputational incidents, climate-related events, or other issues that could have an impact on the business relationship.

However, the key here is identifying the data of real value amongst the vast volume of information. Automated risk intelligence data solutions can be tuned to filter out false positives and discount unreliable or unproven sources, so that when a business takes action on the basis of the data, it can do so with confidence.

As the international environment continues to grow more complex, ambiguous, uncertain, and volatile, and stakeholder scrutiny sharpens, the pressure on organisations to protect their business and reputation intensifies. At the same time, economic pressures mean few organisations have the human resources to screen for continuous changes to sanctions and watchlists. An automated risk intelligence data solution can improve the risk posture of the business and deliver more real-time intelligence, creating a strong foundation for managing compliance risk.

Learn more about Diligent’s risk intelligence data solution.


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