Mitigating business risks and ensuring regulatory compliance through robust due diligence

Nexis Diligence™, from LexisNexis® allows organisations to access extensive business intelligence through a convenient single interface.

As the world faces ever-increasing global risks and uncertainties arising from third parties, organisations are compelled, more than ever, to protect their businesses and ensure due diligence is met.

This is especially true within the financial services industry since it has been even more vulnerable to threats of fraud, money laundering, bribery and corruption, as nearly every business accelerated their shift to online transactions when the news of the COVID-19 pandemic hit.

In 2020 alone, it was found that there were over 1,230 fintech apps available in APAC, and marketers have spent US$244m to acquire new users.

Ms. Evangeline Wong, Vice President Asia Pacific Sales of LexisNexis, observes that whilst the digital shift was a blessing for financial institutions (FI) and consumers who were limited in their ability to have face-to-face interactions, it piqued the interest of fraudsters, money launderers, and other cybercriminals looking to take advantage of the digital influx.

“How can companies develop strategic international business relationships while mitigating these bribery and corruption risks? The most important step is to understand the level of risk posed by the third parties your company relies on,” Wong says. 

Around $2.45b fines were issued for bribery under the US Foreign and Corrupt Practice Act in the first half of 2020 alone, with the companies suffering not just from legal and financial penalties, but reputational and strategic damages, as well.

At the same time, it is worth noting that a lot has changed since governments first began to address issues of money laundering. Several key factors have appeared to expedite anti-money laundering (AML) legislation, as the digital age increased the volume and velocity of businesses conducted globally and introduced new means to transfer and exchange money.

These factors have driven AML legislation up the global governmental agenda, leading to all-around efforts to reduce the risk of money laundering. 

Conducting risk-appropriate due diligence is vital to addressing these vulnerabilities. Wong notes that the compliance units of FIs face growing pressures around due diligence and onboarding. 

“From the outside, regulatory requirements are expanding and there is a heightened demand for supply chain transparency to demonstrate environment, social, and governance compliance. From the inside, FIs are trying to reduce costs involved in screening high volumes of entities,” says Wong.

Wong added that the FIs’ cost-income ratios have been squeezed over time, whilst due diligence and compliance costs have gone up every year. So far, the answer has usually been to employ more people, but businesses are getting increasingly frustrated at giving blank checks to compliance every year.

Addressing risk exposures with Nexis® Solutions

Banks and FIs, as well as regulators, have formalised screening news articles as a key step in mitigating business risks. 

However, Wong pointed out that staying on top of negative news articles for a growing list of customers can be challenging, especially as anything can appear during any stage of a customer lifecycle.

As such, compliance leaders can effectively use adverse news checks as an asset for risk reduction by treating it as an essential due diligence component and executing it efficiently.

“Compliance teams must recognize this need and urgency, plus leverage the best available news data and technology capabilities, to make optimal use of operational resources,” Wong said.

The LexisNexis media archive enhances compliance checks for two main reasons. With a news archive that goes back 40+ years, organisations can uncover past risk-related news needed for onboarding and KYC, allowing clients to get to the ground truth.

Complementing the depth of this archive is the range of content available.  LexisNexis aggregates content from 60,000 sources, including global, regional and local news, industry sources and more.

Moreover, through its due diligence research platform Nexis Diligence, LexisNexis empowers organisations with access to critical resources that allow them to conduct enhanced due diligence and business background checks including screening against watch lists, over one million politically exposed persons, over a thousand sanctions lists, all from one convenient source.

With its easy user interface, Nexis Diligence also offers access to international court cases to keep organisations informed of ongoing litigation that could disrupt business and to support compliance programs to address anti-bribery regulations.

The Report Builder within Nexis Diligence makes it easy to capture a verifiable audit trail to help demonstrate compliance effortsl. The Report Builder allows you to save and add commentary to critical findings, including related country reports.

The flexible solution can further accelerate regulatory due diligence with an optional Robotic Process Automation integration of Blue Prism digital workforce within Nexis Diligence, freeing up human resources for high-value analysis and decision making.

Meanwhile, Wong said that should firms find a potential threat, the flexible technologies and vast content universe available from LexisNexis allow organisations to implement effective due diligence and third-party risk monitoring with customisable, off-the-shelf solutions or through flexible APIs that deliver relevant datasets into in-house risk management applications. Organisations can enhance their risk management workflows with data and technologies to suit their specific risk considerations.

Emphasising the need for Anti-Money Laundering and Anti-Terrorist Financing Compliance

Wong has noted the need for banks and FIs to ensure their compliance with AML and anti-terrorist financing standards for various reasons.

Some of the reasons for this are the upward trend of non-compliance penalties and strengthening regulations to support ethical business globally.

“Regulators in different countries are working together on cross-border investigations, leading to a rise in enforcement actions. Even if you are satisfied with your own anti-bribery and corruption compliance processes, you are still at risk if your third parties do not comply with evolving legislation,” Wong said.

Regulators also expect a robust due diligence approach that includes an Adverse Media component.

They added that a third party in poor financial health could also significantly impact users’ business in a number of ways.

“It could disrupt your supply chain and threaten your other contracts and relationships, or it could signal misconduct. Verifying the financial viability of potential suppliers, business partners or joint venture targets is important, but this task is complicated by the global nature of third-party networks,” Wong said.

Contact us here https://bis.lexisnexis.com/hk/risk_monitoring_and_due_diligence_in_action for a free demo and see risk monitoring and due diligence in action!

About Nexis® Solutions

The Nexis® Solutions division of LexisNexis® Legal & Professional serves companies and organizations across the globe, offering premier news and corporate information through a portfolio of solutions, including the flagship and award-winning Nexis®. This unique combination of market-leading content and innovative technology helps business professionals make more insightful decisions by offering them quick and easy access to the latest news, facts and insights regarding their brand, clients, prospects, competitors, suppliers and industry trends.