In the modern age of global business and global business regulation, companies are looking to new technology to help build robust risk management programs and avoid severe enforcement penalties.
The once commonplace narrative of “greasing the wheels” of international commerce is being muted by aggressive enforcement of anti-bribery laws in the world’s major financial markets. One banking compliance officer summarized, People are worried about getting fined and getting fired.
SEC Enforcement of the Foreign Corrupt Practices Act (FCPA) remains vigorous. There were 12 SEC Enforcement Actions taken in the first half of 2016, compared to nine in 2015 and eight in each of 2014 and 2013. The penalties, too, remain substantial. VimpelCom’s $397.6 million settlement in February was among the Top Ten FCPA payouts of all time.
Not every enforcement action results in a fine. The agency has entered into non-prosecution agreements when companies self-report misconduct and cooperate with the ensuing investigations. The non-prosecution agreements stipulate that self-reporting companies are not charged with violations of the FCPA and do not pay additional monetary penalties.
“When companies self-report and lay all their cards on the table, non-prosecution agreements are an effective way to get the money back and save the government substantial time and resources while crediting extensive cooperation,” said Andrew Ceresney, Director of the SEC Enforcement Division.
So how does a firm detect, or more importantly avoid, individuals or entities engaged in business misconduct? Consumer Reporting Agencies and the companies they serve are taking action to increase due diligence in the areas of fraud and anti-bribery, in part with on-line screening engines geared toward Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance.
ADP, the world’s largest payroll provider, incorporates a global sanctions screening engine in its OFAC compliance program. “WorldWatch Plus provides compliant tools that enable ADP’s Global Security Office to perform proper necessary and complete Due Diligence as a core part of the services we deliver to our business and clients,” said Roland Cloutier, ADP’s Global Chief Security Officer.
The challenge in any emerging technology market lies in evaluating these tools for their effectiveness, quality and reliability. Interrogating global sanctions databases and related watch lists offers new challenges to an industry primarily focused on US-based screening services. Here are some key performance indicators to assist you in evaluating due diligence tools.
Is the tool multi-lingual? Global databases contain non-Roman alphabet characters. The best tools not only translate different character types, like Chinese and Arabic letters, but also manage transliteration, an essential function in the data matching process. Foreign name structures are nuanced, from multiple surnames used in Latin America, to the unique structure of names in certain Asia-Pacific cultures, to the transliteration and lineage associated with Arab names. Screening tools must be able to handle multiple naming conventions and return results for multiple name variations.
How does the tool manage search terms? Search results can be overwhelming unless the tool allows users to leverage multiple data subject identifiers. Date of birth is an obvious identifier and effective for many global sanction and politically exposed person (PEP) data sources. However, adverse media searches rarely list birth dates, making the intelligent consideration of other identifiers paramount for managing adjudication workloads. The best tools evaluate results based on multiple identifiers to prioritize the most relevant findings to the top of the list.
How accurate is the data? The best practice for maintaining information accuracy on thousands of data sources is to update databases daily. Doing so not only gives clients the most relevant screening results, but also supports a QA best practice for identifying changes in the data source ecosystem.
Does the tool provide continuous monitoring? If the due diligence is important today, at the start of a business relationship, it is equally important tomorrow, next month and next year. Continuous monitoring is fast becoming a best practice for international due diligence, with the best tools offering proactive alerts when information within sanctions or media databases changes.
With the help of robust and comprehensive global screening tools, global businesses stand a better chance of keeping pace with the regulations and mounting threats to compliance. Like so many due diligence advancements of the past, global sanctions, PEP and adverse media screening may soon be as common as checking an ID.