Considerations for corporates using AI in third-party due diligence programmes
As third-party risks grow, compliance teams need to gather more contextual information on their counterparties. However, many still rely on manual processes, making the work inefficient and time-consuming. AI-powered automation is transforming how compliance teams operate by handling the heavy lifting upfront. Without this capability, corporate compliance programmes risk falling short in the eyes of regulators. At the same time, teams struggle to adopt a truly risk-based approach. This raises an important question: Could not using AI soon be considered negligent for third-party due diligence?
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What's inside
Adequate compliance systems must keep pace with technology
Applying a risk-based approach is a key foundation of most modern compliance programmes, yet current tools often fall short in achieving this. Database checks are quick but incomplete, and manual keyword searches provide context but take too long for in-depth analysis of every third party. With advances in AI technology, what defines an adequate compliance system is now more robust and scalable. Choosing not to adopt it risks falling behind technological progress.
AI will push companies to rethink what's considered effective
Third-party due diligence programmes are less effective when compliance teams can't quickly analyse large volumes of unstructured information increasingly available in public sources. But it isn’t just about speed... it’s also about accuracy and breadth. Unlike manual processes, which are prone to oversight and inconsistency, AI ensures that no relevant data is overlooked—whether it’s buried in a local news story or hidden in an obscure blog post.
The broader business benefits of using AI for third-party due diligence
Faster third-party due diligence programmes, conducted earlier in the business cycle, help triage low-risk from high-risk entities. This frees up compliance teams to focus on the most challenging counterparties, transforming the function from a business delay to a business enabler. This not only safeguards the company from regulatory risks but also protects its standing with consumers, who vote with their wallets and help keep the company profitable.