The Citizen: Technology Solutions for Due Diligence – What Questions Should You Be Asking

Monday, October 1, 2018

Within the Residency and Citizenship by Investment (RCBI) environment there is a marked increase in scrutiny of both programs and agents with respect to applicant due diligence. This increased scrutiny and pressure comes from multiple directions – financial institutions and their respective correspondent banks, regulators, RCBI program operators, and foreign governments. Among these pressures, agents are more and more expected to have a vigorous onboarding procedure for their applicant clients including appropriate due diligence screening which is efficient, consistent, and auditable. There are a number of technology products purporting to provide effective due diligence screening solutions for the RCBI industry which claim to meet these new, more exacting standards. However, not all have the same capabilities, and many fall substantially short of industry best practices. Armed with a few basic technology-focused questions, RCBI industry professionals can critically evaluate potential solutions to find the one best suited to their business model and screening needs as relates to clients with global footprints.

Is the technology designed to focus on risk?

Many search technologies do a fine job of capturing data on a specific subject. But without the added functionality of risk-focused categorization, the user is left to review disorganized and irrelevant information, wasting time and promoting inconsistency and human error. Innovative technologies like natural language processing

(NLP) enable machines to understand context and hone in on findings related to risk. Automated risk classification means your time is spent reviewing red flag issues, not trying to identify and organize them.

Does the technology search and understand findings in multiple languages?

The majority of clients in the RCBI industry come from jurisdictions where the primary language is other than English. Many technology solutions search only in English characters and/or English language. While English spellings of individual and company names sometimes appear in foreign language websites and publications, the inability to search in their native language leaves a notable gap in the diligence process by overlooking significant amounts of local, and often more reliable, information on a given subject. Your chosen technology solution should be able to screen data from across jurisdictions and languages, particularly those languages and jurisdictions relevant to RCBI applicants. Once the information is captured, presenting those findings in easy to understand translations is also a critical capability.

Managing false positives and duplicate findings?

Weeding through information that is not relevant to your subject, and reviewing information on the same topic multiple times are two of the most time consuming and frustrating aspects of the due diligence process. Results should be immediately useful to you, and not require hours of work to sort and identify the risk-relevant items you want to review. A technology that uses NLP and machine learning algorithms to understand context will identify and weed out false positive data effectively so that you don’t have to. Similarly, these technologies can be directed to identify and remove duplicates, saving time and money.

Structured v. unstructured data?

It is important to understand the difference between structured and unstructured data when reviewing technology solutions for due diligence. A technology solution that harnesses both produces the most complete risk profile of your client. Structured data consists of organized content such as lists, databases, spreadsheets and direct websites. These are easily searchable by basic technology solutions as they are neatly laid out and systematized. It is estimated, however, that 80% of online information is data that is unstructured, such as magazines, news articles, web pages, blogs and social media, as well as open source internet and deep-web content. A solution that searches only structured data, without the ability to harness and understand information from unstructured sources, is thus only taking into consideration at most 20% of the risk-relevant information potentially available about a subject.

Real-time Information or curated databases?

Proper due diligence screening requires building a risk profile that incorporates up-to-the-minute information across all available data points. Curated databases have limited information on a limited number of subjects. Content is governed by human intervention in deciding the methodology for inclusion, the data points collected, and update frequency. However, real-time open source screening assures you that the risk profile you are reading today has the most timely and relevant information available.

Ongoing monitoring for new red flags?

Best practices demand that your client maintains his/her reputable status throughout the application process. Their application, and your reputation, depends on it. A complete technology solution will offer ongoing monitoring capabilities that continue to scan real-time sources and identify risk-relevant information should it arise so that it can be addressed in a timely and effective manner. Increased scrutiny of RCBI applicants demands that agents take greater steps to meet due diligence best practices for onboarding new clients and applicants. Technology solutions exist to assist in this process, leveraging advanced technologies like Artificial Intelligence, Natural Language Processing and Machine Learning to create efficiencies and promote accuracy. Armed with the right questions, it can be easy to navigate those solutions to identify one that best meets your needs, and those of the RCBI industry.

 

Read the article on page 74 and 75 of Issue 2 of The Citizen.

 
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Russell Scarcella, Director

Russell Scarcella is a Director based in Exiger’s New York City office. Russell brings more than 20 years of legal and risk management consulting and advisory experience assisting clients in developing and implementing due diligence and operational risk programs. He has provided domestic and cross-border investigative due diligence consulting services across the alternative asset community as well as to multiple foreign governments with respect to immigration and citizenship programs.

Karen Kelly , Director, Strategy & Development, Exiger Diligence

Karen is Director of Strategy & Development based in Exiger’s Vancouver office. Karen joined Exiger Diligence from IPSA International, Inc., where she assists on special projects and strategy related to the Immigration, Citizenship & Visa (ICV) Practice.

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