Best customer due diligence tools for qualitative information

Compliance data sets alone aren’t enough to fully understand a client’s background. AML teams need tools that give insight into why a client is on a PEP, sanction list, or watchlist. Ignoring the context means lawyers might miss subtle warning signs in client behaviour. In this blog, we’ve summarised the best customer due diligence tools for AML screening and qualitative due diligence. (Spoiler alert: Scroll to the bottom to learn how Xapien combines both).

Best due diligence tools for compliance screening

Moody’s Orbis: Provides data on corporate ownership structures, beneficial owners, politically exposed persons (PEPs), and sanctions information. It covers over 528 million entities worldwide. Orbis gathers this data from over 160 providers and hundreds of their sources. It then standardises the data to provide a clear and comparable view. Orbis provides a holistic view with corporate trees that show the ownership of business partners, third-party associates, and beneficial owners. It can even identify indirect links between companies and sanctioned entities.

Refinitiv LSEG World-Check: Access accurate and structured information for due diligence. With just a name or an identifier, you can search individually or in bulk for a list of potential matches. From there, you can review detailed profiles, checking key details like dates of birth to confirm identities. Then you can easily tag results as “possible hit,” “confirmed hit,” or “discarded,” and add notes to explain your decisions. Similar to the Orbis, the system can sometimes throw up false positives. This means compliance teams might need to sift through multiple entities to connect the dots. 

ComplyAdvantage: Actively monitors and updates thousands of government regulations, law enforcement watchlists, and international and national sanctions lists. Its powerful risk database also covers Politically Exposed Persons (PEPs). ComplyAdvantage uses automation to keep its lists current and spot new risks quickly. It adds tens of thousands of risk events from millions of data points daily. ComplyAdvantage also provides transaction monitoring, payment screening, fraud detection, and case management. Their enhanced PEP profiles include individuals, relatives and close associates.

The limitations of screening compliance data sets

Compliance databases are essential for providing data on politically exposed persons (PEPs), sanctions, and watchlists. But they have limitations. These databases offer isolated data points without context, making it difficult to understand the full picture. For example, a client is flagged as a PEP without explaining why they’re politically exposed.

Compliance data is binary. It gives a simple “yes” or “no” in background checks, which can be useful for initial screening. However, relying only on this data leaves lawyers with a shallow understanding of their clients. They can tell if a match exists, but miss out on the deeper insights about who they’re working with. Without looking into the story behind the data, lawyers might miss details affecting their advice, or subtle red flags in client behaviour.

Additionally, compliance databases often receive updates periodically rather than in real-time. This lag can mean missing recent changes in an individual’s status or global developments that affect sanctions and watchlists. False positives are another issue, leading to unnecessary onboarding and legal work delays. A purely quantitative approach can’t distinguish between false positives and real risks. This highlights the need for qualitative information in the client onboarding process.

Qualitative information gives the full narrative

Quantitative compliance data alone is often insufficient for comprehensively assessing a client’s background and managing risks. Law firms should consider shifting their focus towards the narrative behind politically exposed persons (PEPs), sanctions, and watchlist datasets. Delving into the full narrative means compliance teams better understand why a client is on a watchlist or sanction list. This can help law firms manage reputational risks effectively.

Many regulators now require firms to go beyond data checks, conduct more in-depth investigations, and provide evidence of it. Better understanding a client’s PEP status or sanctions history means law firms can build better relationships. They can also demonstrate their commitment to meeting clients’ unique needs.

Due diligence tools for qualitative information

Encompass: Generates a KYC report in about 8 minutes, pulling together information from corporate and UBO registries, regulators, stock exchanges, and various screening sources like PEP, sanctions, and adverse media. However, users still click through multiple screens and hunt for information to get a complete picture of the risk. Even when the portal flags potential risks, users must manually review the original documents to confirm the flags.

Dow Jones Risk & Compliance: Online AML screening service that gathers information from broad public sources, including newspapers, government websites, and directories. Its multilingual researchers build a comprehensive risk database using the high editorial standards of Dow Jones. It also provides high-quality and regularly updated corporate data for UBO, PEP, and Sanctions. Continuous monitoring means you can receive timely updates on emerging risks. 

LexisNexis World Compliance: Robust collection of news and sanctions sources. This structured database offers clear access to critical details about sanctions, PEPs, and adverse media. It goes beyond basic information by conducting in-depth analyses that include exact matches, nearby matches, phonetic variations, and cultural differences. The tool builds detailed relationship trees for each profile, revealing connections to family members, contacts, and business associates. It also accounts for common spelling mistakes and transliteration variations. Search results are prioritised based on their relevance and accuracy.

Xapien does both for qualitative customer due diligence

Xapien transforms how compliance teams approach due diligence. It’s an automated AI tool that pulls from both structured and unstructured data. It integrates full sanctions, PEPs, and watchlist screening data with insights from the company’s online presence. Xapien scans the entire internet, including news articles, press releases, and company information, to build a thorough client profile.

But our AI doesn’t just collect data. It deeply analyses it for patterns and anomalies, uncovering connections that might be missed by human analysts. For instance, it can reveal when an individual is described in the media as a “close friend” of someone risky. This added layer of context helps you understand their risk profile more clearly and completely (here’s what Chartis Research analysts said about us in the RiskTech AI 50 report).

Xapien doesn’t stop at identifying potential risks either. It summarises everything it has researched, disambiguated, and analysed into clear sections that resemble a human-written report. This is powered by our generative AI technology with anti-hallucination to prevent false information. Xapien reports are structured in an actionable format, ready for executive review or regulatory checks.

Time to review your tools for customer due diligence?

Quantitative compliance data, while valuable, falls short of providing a holistic understanding of clients’ backgrounds and motivations. Law firms are now focusing on understanding the narrative behind compliance data, particularly with important developments in the AML world (Kingsley Napley has a useful round-up here). As a result, firms are recognising that quantitative information alone doesn’t suffice in today’s complex regulatory environment.

To learn more about Xapien, fill in the form below for a chat with the team.