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EXCLUSIVE: Finding Compliance Nuggets Amid 24/7 News Torrent

Tom Burroughes Group Editor 12 January 2024

EXCLUSIVE: Finding Compliance Nuggets Amid 24/7 News Torrent

We talk to Dow Jones about the work it does in collating, screening and digesting a vast haul of daily news so that banks and others can keep abreast of risks, comply with rules, and safeguard their businesses and clients.

At a time when bankers and advisors must have accurate data on a prospective client’s source of wealth, the kind of information firepower that a business such as Dow Jones brings carries weight.

There are many regulatory requirements that make timely and precise data more important than ever. The US Corporate Transparency Act, for example, took force from the start of January, while the European Union, UK, Switzerland, and other jurisdictions have tightened screws on money laundering and other illicit financial flows in recent years. For financial professionals seeking to keep their businesses compliant, doing the job requires data – lots of data.

Bankers must scrutinise not just companies and individuals, but for example the securities issued by companies – often on multiple exchanges.

“There is a trend of investment screening where organisations are cognisant of national security-linked investment exposure,” Joel Lange (pictured), general manager, Dow Jones Risk & Research, told this publication in a call. His role covers two business units, Risk & Compliance, and Factiva.

Joel Lange

The patterns of what sort of information is in play change constantly. When the Risk & Compliance business first started out at Dow Jones, it tended to focus on individuals such as politically exposed persons, and staff at Swiss banks, such as in the early Noughties. In the past decade, however, the firm has moved towards looking at the third parties that work with corporates and banks, he said. “That is all higher risk data,” Lange said.

Dow Jones works with the professional services firm Dun & Bradstreet, for example, to drill into the details of companies.

And the firm has been prepared to spend to acquire analytical resources when required. At the start of 2023, for example, Dow Jones made an equity investment in Ripjar, a data intelligence software business. That firm helps Dow Jones to distil the vast trove of news information in its Factiva service that is used by bankers to track stories about individuals.

That raised the inevitable question about how AI fits into the picture.

“Complexity [of data] is an area where there are lots of manual tasks and some of them can be automated,” Lange said. Certain aspects of due diligence reports can be streamlined via AI, he said.

This news service asked Lange how AI can be put to use.

“With the regulatory landscape in constant flux and millions of individuals and entities to screen against, a human simply cannot work fast enough to process the volume of information required to protect their company from legal, ethical and reputational risks. That’s why organisations are increasingly deploying advanced AI technologies to analyse large volumes of both structured and unstructured data to detect patterns indicative of financial crime,” he said. “This ability to extract critical insights and red flags from unstructured text is arguably one of the biggest advantages of implementing AI into a compliance programme.”

“Adverse media screening can help organisations get ahead of new and emerging risks as they surface in the media. Indeed, industry bodies around the world, including the Wolfsberg Group and the Monetary Authority of Singapore, are increasingly recommending the use of negative news in the customer due diligence process,” Lange continued. 

Sanctions have added to the mix, he said.

“Multiple rounds of sanctions targeting Russian entities and oligarchs since the onset of the war in Ukraine has highlighted the need for banks and corporations to not only monitor adverse media on customers and third parties, but to also act upon the results. Machine Learning (ML) and Natural Language Processing (NLP) can automate that process, enabling compliance officers to continuously screen and monitor the thousands of news articles that are published every day in multiple scripts and languages,” Lange said.

Lange has been at Dow Jones since September 2021 and before that, as managing director, risk and compliance, at ION in the UK, and then at Dow Jones again for just over six years in various roles involving risk and sanctions compliance, and prior to this, at Accuity.

The Dow Jones business model means that it has not only developed resources to process reams of news stories to unearth valuable information for compliance professionals, for example, but its own journalism outlets, such as The Wall Street Journal and The Times of London, mean it has important news gathering capabilities in the first place.

Data, data, and more data
Undertaking all this work requires as much transparency over the use of data as possible. With that in mind, this news service asked Lange what he thought of the tension between privacy and transparency of beneficial ownership data, as highlighted by a top European court’s ruling a year ago.

“We are very much supportive of transparency in relationships around beneficial ownership. Legislation to make databases more opaque [making it] harder for banks do their job…we are not supportive of that,” he said.

There is plenty of work to do. Digital payment players in Singapore such as FOMO Pay, for example, have sought to improve digital compliance efforts. (In the case of FOMO Pay, in late August it announced a strategic pact with Notabene, which operates an end-to-end solution for global Travel Rule compliance.)

So what for the future?

“When we launched the Dow Jones RiskCenter Advanced Screening and Monitoring (ASAM) in 2023, we were looking to support corporates and financial institutions in any market to identify risks with continuous screening and monitor entities and individuals against both structured and unstructured data,” Lange said. “With more and more organisations continuing to grapple with the mounting challenges of regulatory compliance, the Dow Jones Risk & Research team will continue to invest in advanced AI, generative AI and automation for the compliance sector. We will be expanding our suite of compliance-ready, AI-powered risk management tools in the coming months.”

Lange expects banks and other financial firms to face plenty of news events to keep on top of this year.

“Escalating geopolitical tensions between the US and China, coupled with wide-ranging sanctions against Russia and more recently concerns around the financing of Hamas, Hezbollah, and Iran are making compliance both more important and more difficult than ever before,” he said.

Hype risk?
This publication put it to Lange that there is a risk of “AI hype.” 

“While AI can help compliance teams achieve more at scale, the potential pitfalls are well documented – and inaccurate or incomplete data can lead to flawed insights and unreliable decisions. Any organisation implementing new technologies for a compliance use case therefore needs to to take a thoughtful and considered approach,” he replied. “Decision-makers in highly regulated industries, like financial services, have erred on the side of caution when it comes to allowing employees to leverage these emerging technologies, due to the unreliability of information.”

“Ultimately AI systems are only as good as the data that feeds them – and even small flaws will undermine the reliability of outputs. Poor data quality also leads to an increase in false positives or the need to sift through irrelevant information, thereby raising the compliance burden and costs. An investment in quality data not only accelerates the discovery of actionable insights but also prevents disinformation and misinformation from obstructing risk management, or worse, leading to ill-informed decision-making,” he said.

And a subject dear to journalists’ hearts is copyright – and how AI affects it. 

“It is crucially important to gain visibility into the data that is feeding your model to ensure it is both credible and copyright compliant. If your technology provider is simply scraping data from the free web, you are potentially violating intellectual property and copyright laws. We always say, particularly when it comes to journalistic content, do not risk committing a crime in your endeavour to combat financial crime,” Lange said. “We are starting to see legislative developments in markets such as Australia and Canada designed to protect journalism in that regard – and that trend will only continue. So while there are so many opportunities for efficiency, there is also a duty of care to ensure you are not falling foul of the law when trying to comply with financial crime regulation.” 

Compliance complexity remains a challenge. 

Lange said the five countries that ranked highest overall for compliance complexity are the United Arab Emirates, Qatar, China, Argentina, and Malaysia. Those with the lowest score for complexity, he said, are Ireland, Denmark, Curaçao, Honduras, and Nicaragua. In the Asia-Pacific region, Australia and Singapore also ranked well from a compliance complexity standpoint. 

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