The risk and compliance landscape is rapidly changing as regulators seek to protect consumers when they bank, shop, and invest. If you run a business, you need to know where you stand and how these changes apply to you.
So, let’s look at the risk and compliance trends that will likely affect business leaders in 2023.
1. The Tech Side
Google Bard and ChatGPT could change the way that everyday consumers engage with the internet, whether they’re learning about recipe ingredients, speaking with company chatbots, or creating content for YouTube videos and Instagram captions. However, these services also need to be monitored and used correctly, as there is a risk of plagiarism, as well as ethical issues.
Content is not created out of thin air. It’s not written by an advanced AI. Rather, it is sourced from existing content and amended to suit the request. Someone owns that content, and they might not be happy with letting an algorithm access, amend, and use their digital assets.
What’s more, as the content is drawn from an existing source, there is always a risk that the text will be inaccurate or misleading, with some arguing that it could harm reputations, spread false information, and even incite violence.
These programs are relatively new inventions, with ChatGPT first launching in November 2022 and Google Bard appearing on February 6, 2023. The emerging AI technologies could be a potential game-changer, but they still show some limitations in their performance. Regulators haven’t reacted yet and are still waiting to discover what kind of regulations will govern these technologies.
Right now, the best option we have is to combine human expertise with the new AI technologies to get complete accuracy and avoid factual inconsistency. A Data Pro employs the latest technologies and works with experienced domain specialists to deliver high-value information to its clients.
2. Due Diligence
Enhanced due diligence (EDD) plays an essential role in the fight against money laundering and fraud. It’s a form of due diligence that must be carried out on high-risk individuals, such as:
· Cash-intensive businesses
· Individuals from countries without adequate AML systems
· Private banking institutions
· Companies with nominee shareholders/shares in bearer form
· Individuals from countries known to support terrorism
· Any kind of relationship conducted in unusual circumstances
· Businesses with unnecessarily complex or opaque ownership structures
Depending on the nature of the product or service being offered, EDD checks are usually carried out when an individual/business becomes a new customer, whether they are purchasing large amounts of product, paying for a service, or transferring money for investment or banking purposes.
The higher risk associated with these entities necessitates additional checks, including advanced searches, transaction monitoring, funds verification, and intelligence reports on the customer or business owner.EDD protects the organization from financial crime, including stolen bank account details and card numbers. It also reduces the risk of chargebacks. More importantly, it helps to combat money laundering, and with an estimated $2 trillion+ laundered every year—most of which ends up in the hands of terrorist organizations and other criminal gangs—it’s a problem that needs to be addressed.
Following the Russian invasion of Ukraine in 2022, Russia became one of the most sanctioned countries on earth. At the time of writing, there are over 11,500 sanctions in place and these cover both individuals and companies.
Global organizations are expected to adhere to sanction lists and refrain from doing business with sanctioned entities. Furthermore, as the situation in Ukraine is still ongoing, sanction lists are constantly being amended and it seems like the rules are changing with each passing day.
There are also a number of sanctions against Iran, as well as countries and organizations believed to be involved with ongoing conflicts in Russia and Africa, such as Belarus and the Wagner Group.
At A Data Pro, we provide a range of services designed with compliance in mind, including sanction list checking and due diligence reports.
Our database includes millions of entities, including publicly exposed persons (PEPs), and takes data from a variety of sources. We use entity linking and entity matching to provide quick answers and solutions and help you to discover if you’re doing business with high-risk individuals or companies within the crypto space.
4. Crypto Regulation
According to some experts, we’re in the midst of a “crypto winter” right now, with many cryptocurrencies hitting rock bottom and showing few signs of improvement.
These currencies are still alive and well, though, and many governments are seeking ways to improve regulation and provide a safer future for cryptocurrency users. As things stand, cryptos are largely unregulated. It’s also a magnet for money laundering, so it’s highly likely that regulators will focus more on this sector in 2023.
Even though the crypto market is largely a green field we are seeing regulations mushrooming around the globe in countries such as UAE, UK, Italy, Spain, Japan and the US. Those countries are at different stages of adoption of the regulations and some regulations only impact subsectors of the crypto industry and the variety of crypto “products”, we expect it to evolve in the coming months.
Nonetheless, even today, that accept cryptocurrency payments and crypto exchanges should perform the typical Know Your Customer process part of the AML assessment when acquiring new clients and at certain frequency with their existing customers.
A Data Pro can offer variety of background checks in heterogene registries such as Sanction lists, Adverse Media, Politically Exposed Persons and Company data.
5. ESG Due Diligence
ESG stands for environmental, social, and governance and concerns the ways that companies must adapt to accommodate these pertinent issues.
An ESG risk evaluation helps business leaders to identify risks relating to issues such as climate change, bribery/corruption, and human rights, among other things.
Everyone can play a role in the fight against climate change and this is especially true for organizations and influential business leaders. These days, consumers expect companies to understand their environmental impact and implement ways to reduce their carbon emissions.
How does the company treat its employees and the community in which it is located? Do they use products that benefit from child labor or questionable labor practices? Are there any potential human rights issues in the supply chain?
The “G” in ESG concerns how the company is run and highlights potential operational and accounting issues. For instance, poor accounting and financial negligence could have severe tax and legal implications while issues with the handling of employees could expose a company to bribery and ethical problems.
Today, ESG reports and evaluation is mandatory only for publicly listed companies. Those need to compute an ESG score (we call it “green index”).
Since A Data Pro has been building its ESG expertise over the past years, we can help with preparation of the ESG reports and scoring.
Compliance, Risk, and Data Collection with A Data Pro
Need help with in the area of risk intelligence? We have been around for more than 20 years and can support you by leveraging our editorial, database, due diligence and data science capabilities , data aggregation, and risk management.