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.