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Guest Post: How generative AI is transforming due diligence

Blog

January 30, 2024 | Cassidy Belville

Chris Green, CEO, Xapien 

Compliance is often seen as the department that slows down business, causing deals to stall, pipelines to stagnate, and customer experiences to suffer. As compliance widens its scope, and organisations deepen their commitment to ESG practices amid changing global market dynamics, this friction is only expected to grow.

The importance of knowing third parties 

The role of compliance is to prevent actions that could break regulations or lead to any financial, reputational, or other risks that sit outside an organisation’s risk threshold. This entails having a comprehensive understanding of an organisation’s counterparts — clients, suppliers, and investors — to spot inconsistencies and potential red flags that point to regulatory or reputational risks. Only then can organisations make strategic decisions.

The work of compliance professionals hinges on the information accessible to them. Initially, this was confined to official state registries and government records like passports and incorporation documents. Over time, Politically Exposed Persons, sanctioned entities, and other risks surfaced, so databases were created to check against these risks.

However, in today’s digital landscape, the surge in publicly available information demands that compliance professionals extend their search to billions of internet pages for a comprehensive understanding of their counterparts. 

This explosion of data has made the role hugely challenging and time consuming, with many compliance teams simply unable to afford deep due diligence across the entire indexed internet. Instead, they rely on traditional databases which limits what an organisation can know, and a few cursory internet searches. This exposes organisations to massive risk

Whether harnessing internet data, or sticking to databases, the compliance process is time-consuming. Teams must review lengthy PDF reports, sift through numerous false positives, and read multiple pages to determine the relevance of data to the subject. The result? A slow compliance process that often takes place at the end of sales conversations, causing tension in relationships with business teams awaiting a decision.

Now, imagine if compliance professionals had the tools to reveal comprehensive insights about potential clients. What possibilities could this unlock for the entire business? These insights could be seamlessly shared across the organisation, enhancing sales conversations and transforming compliance from a business prevention department into a business enabler. 

Due diligence could become the initial step rather than the final one in a sales process. Sales teams would depend on compliance to provide essential insights about potential clients before committing substantial time and effort to prospect conversations.

Automating due diligence with generative AI

AI makes this possible. By connecting traditional data sources with the vast online information about third parties, compliance professionals who use Xapien’s AI tool can gain deep understanding of their counterparts in minutes, not days.

Our AI tool efficiently searches trillions of web pages, blending compliance data with open-source information for a nuanced understanding of third parties that goes beyond databases and watchlists. Using machine learning techniques, Xapien reads and extracts key insights from web pages. It does the grunt work that slows compliance teams, such as reading and reviewing to ensure the information gathered is directly related to the subject. 

The next job of the compliance team is usually to write the report. Again, Xapien already does this. It writes concise summaries that are fully-sourced down to sentence level based on the information it finds. Huge time savings mean that Xapien reports can be run as the first, and not the last step in any sales or client onboarding process. 

Running third parties through Xapien at the beginning of the compliance process helps identify early red flags. This proactive approach allows compliance teams to catch risks early in the process, preventing teams from investing resources in a deal that might not go ahead, but also unlocking useful insights about clients that the sales team can use in their conversations.

Eliminating multi-page PDFs and false positives enables compliance teams to focus on strategic thinking based on the information already analysed by Xapien. Having these sharable reports facilitates quicker decision-making with the business team on how to proceed. 

One Xapien customer, a compliance team in a private equity firm, used a tool that added two hours for each new screening. Now, it takes an additional 10 minutes. This streamlined process ensures no delays in deals, enabling the business team to proceed more efficiently.

Find Xapien on the Provenir Data Marketplace

Partnering with Provenir has strengthened Xapien’s foothold in the AML-regulated sector and helped more businesses access fully-automated enhanced due diligence (EDD) reports on individuals and organisations. By automating manual research, it helps compliance teams scale their operations and, most importantly, catalyse revenue growth. If you’d like to learn more about how Xapien could help your organisation, get in touch with our team of experts here.

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