Donor due diligence:
The true impact of AI on due diligence
AI increases speed and scope, helping organisations stay ahead of the competition
As with many aspects of life, organisations are no longer questioning the use of AI in due diligence but rather how to use it effectively.
AI helps researchers and analysts do more. By automating repetitive tasks, individuals can spend more time on higher-value, interesting work.
For instance, in a law firm, researchers conducting due diligence must carefully scrutinise numerous documents and verify corporate structures, supply chains, licences, finances, and compliance with employer regulations.
In the non-profit sector, researchers might be researching the background, business affiliations, real estate holdings, connections, and affiliations of a prospect who has offered to make a game-changing donation.
In all cases, AI helps organisations avoid legal, ethical and reputational risks while speeding up due diligence and reducing the scope for human error or bias. As a result, organisations no longer have to choose between investing significant resources into due diligence or taking a chance and exposing themselves to unnecessary risk.
But it’s important to note that AI tools aren’t a replacement for human intuition, judgement, and decision-making abilities.
At a certain point, a human has to take ownership. There will always be a point where AI stops and humans start.Shaun O’Mahony, CEO, Xapien
To recap, let’s quickly define AI and machine learning. Then, we’ll explore some real-world examples of how our customers use it to conduct due diligence.
The role of AI in due diligence
In short, Artificial intelligence (AI) involves using computer programs to perform tasks that were traditionally done only by humans.
One specific type of AI, called machine learning, enables computers to learn and make decisions from data without human input. When applied to due diligence, AI and machine learning can help organisations improve speed, accuracy, and insight.
By automating certain tasks and analysing large amounts of data, organisations can quickly gain a detailed understanding of their subject’s reputation, background, and objectives. And, by using AI to monitor changing regulations and sanctions, organisations can proactively manage their risk exposure.
As we’ve discussed, AI is revolutionising the due diligence process and improving risk management for organisations. In fact, our customers have experienced significant success by incorporating AI into their workflows. Let’s take a closer look.
Completing a day’s due diligence in 12 minutes at Griffin
Banking as a service provider Griffin places a high priority on compliance and only works with highly reputable clients and suppliers. But enhanced due diligence tasks, such as adverse media screening and sanctions list checks using search engines, were time-consuming and resource-intensive, often taking a day or more per prospect.
This slowed growth and was causing delays for customers who were considering multiple options. If negative information or risks were later discovered, it resulted in wasted time, or worse, damaged Griffin’s reputation.
Now, as soon as a prospect or supplier is mentioned, their name is run through Xapien. Inputting the search terms takes just 30 seconds, and the compliance team can leave the software running while they get on with other tasks. In just 20 minutes, the results are available which takes just half an hour to read. And, direct risks are highlighted, so compliance can skip the irrelevant information.
Thanks to Xapien, enhanced due diligence on the directors of prospect companies and suppliers has gone from a resource-intensive one-day process to detailed evidence-based reports in under 12 minutes. The time savings are colossal.Alex Nash, Money Laundering Reporting Officer, Griffin
Freeing up 1,000 working hours at Dartmouth College
Five strategic analysts at Dartmouth College conducted background checks on prospective donors during the solicitation process but limited their research to one hour per prospect due to the large volume of prospects. This often resulted in incomplete reports that only scratched the surface of an individual’s profile.
Due diligence checks were conducted later in the solicitation process, which could lead to awkward conversations if problematic information was uncovered. It also resulted in wasted time for fundraising staff and donors if a donation couldn’t be accepted due to the uncovered information.
Google was primarily used for background checks, with analysts adding keywords like ‘investigation’ or ‘scam’, while sanctions lists were checked using database providers.
With Xapien, due diligence is now conducted as soon as a prospect is identified, allowing fundraisers and prospects to proceed with confidence. More than 1,000 working hours are freed up, as it would take analysts eight hours to create a report with the same detail that a Xapien report generates in eight minutes.
Background research reports are generated quickly, typically in less than ten minutes, by simply entering a name and relevant details. These reports provide nuanced and hard-to-find information about prospects’ careers, achievements, and personal or philanthropic objectives, allowing previously overlooked prospects to be advanced more rapidly in the fundraising process.
Xapien’s concise reports eliminate surprises and risks by providing detailed information that enables Dartmouth College and its stakeholders to prepare accordingly. They’re presented in a user-friendly format, providing all the necessary information at a glance.
They also include a ‘direct/indirect’ risk section, allowing for easy identification of relevant and irrelevant risks without the need for extensive reading.
Shifting due diligence from afterthought to essential at Cambridge University
At the University of Cambridge, prospect research teams conduct comprehensive research on a prospect’s background, wealth, and interests.
Once the fundraising team identifies potential donors, they submit due diligence requests for bespoke background checks and risk assessments, which can take up to two days. But if risks are found, donations may be rejected or subject to further ethics committee checks. Finally, fundraising begins.
Xapien’s automated background reports provide comprehensive insights into prospects or organisations worldwide in just 5–10 minutes. These reports include flagged risks, wealth estimates, assets, and associates, empowering fundraisers to approach higher-value and higher-potential prospects.
The integration of due diligence with prospect research has resulted in a streamlined process that supports and enhances both functions. This has led to increased fundraising opportunities as fundraisers can confidently use the quick and transparent information provided by the reports to inform their decisions.
The benefits of AI in the due diligence process
Now we’ve explored it in practice, let’s break down how AI can enhance the due diligence process at multiple points.
Improving onboarding speed
The amount of data generated globally is expected to reach an unprecedented 181 zettabytes of data per year by 2025 (that’s a lot of zeros in bytes), compared to 79 zettabytes in 2021 and only two zettabytes in 2010.
With this explosion of data, due diligence has become increasingly complex, yet remains a time-sensitive process that can greatly impact first impressions and potential opportunities. Delays can result in clients seeking other representation, deals falling through, or donors selecting a different non-profit.
However, AI has transformed the due diligence process from one that took days to one that takes minutes, lifting the burden of data-heavy tasks from human researchers and providing a solution to the ever-expanding data landscape.
Reducing the scope for human error
Due diligence takes place at critical junctures. The results determine who an organisation works with, or whether major deals take place. Small human errors, or even differences in perspective, can have major ramifications.
In short, AI helps reduce discrepancies and deviations.
At Xapien, from the outset, we minimise what the human needs to ‘know’ and you don’t need any specialist knowledge to get the best out of the tool. This means anyone can use our AI, and benefit from all the ground-clearing, research work that it can do.
“We completely eliminate the risk of asking the wrong question, or framing it incorrectly. Xapien is designed to always answer the same question, ‘what do I need to know about this person or organisation before I do business with them?Shaun O’Mahony, CEO, Xapien
Removing language barriers
Due diligence is increasingly important for organisations operating globally. But processing documents, news articles, and other materials in multiple languages can pose a challenge, even for multilingual research teams. Important facts can easily be missed, putting the organisation at risk.
AI can help mitigate this risk.
Staying ahead of evolving laws, sanctions and risks
In a bid to prevent ‘foreign actors’ from exercising undue influence, English universities will soon have to report and source any funding from overseas people and organisations.
The proposed Freedom of Speech Bill amendment poses a potential challenge for fundraising departments, who may need to spend additional time manually researching prospects. But with AI technology, such as Xapien, due diligence research can be completed in a matter of minutes.
Whether it’s used by universities, non-profits, or law firms, Xapien empowers due diligence teams to navigate complex environments with ease. By conducting comprehensive searches across various data sources, it enables the proactive identification of people who may be at risk of being added to sanctions lists in the future.
For instance, Xapien can uncover mentions of a client as a ‘close friend’ of a sanctioned individual in news articles, which may not be picked up by traditional sanctions checks.
Xapien is instrumental in giving a quick, strong understanding of individuals and their sanctions exposure.Director, Dechert LLP
How AI-driven due diligence helps law firms uncover hidden risks and protect their reputation
Law firm A and law firm B have different approaches to due diligence. While law firm A relies on limited checks using PEP or sanctions lists, law firm B leverages Xapien’s advanced capabilities in open-source data analysis.
In this case, Xapien’s analysis uncovered a news report indicating that the client held assets on behalf of the Russian president, which law firm A missed.
Armed with this knowledge, law firm B can make an informed decision about whether to accept the client, while law firm A is unaware of this potential risk. By using AI-powered due diligence tools like Xapien, organisations can mitigate potential risks and make better-informed decisions.
Implementing AI for the best results
There are many tools out there that can enhance due diligence, but some are better than others. The best will help organisations conduct deep due diligence and make decisions quickly. They’re also explainable, and collate data from disparate sources.
The importance of explainability
Explainability is like showing your work in maths class: it’s a way to demonstrate how you arrived at a conclusion.
Proving that due diligence has been conducted using search engine history is time-intensive and error-prone. But when AI is explainable, organisations can easily provide regulators with evidence that due diligence has been conducted, and show how the technology arrived at its conclusions.
There are over 20 unique, yet explainable, algorithms at work under Xapien’s bonnet, each addressing a discrete part of the puzzle that it solves for users. That might be extracting job roles from text, cleaning addresses or summarising thousands of fragments of information.
Integrity is a core pillar of the Xapien platform. We source every fact we present to the user, right back to the original records or articles we sourced it from, which is another way we are different from most generative black-box AI tools.Shaun O’Mahony, CEO, Xapien
Collating data from disparate sources
Xapien uses cutting-edge technology to generate comprehensive and detailed profiles of individuals or companies in minutes. It searches a wide range of sources such as PEPs and sanctions databases, news and media articles, corporate records, and various internet data including LinkedIn, Wikileaks, offshore leaks, and more.
But it goes beyond just presenting articles for users to read. It reads and processes the information contained within, including assets, associates, wealth, business roles, descriptions, quotes, and affiliations. The tool then categorises and presents the information in a digestible report, saving valuable time and effort.
By leveraging NLP and machine learning algorithms, Xapien efficiently connects and analyses all these oblique references, saving significant time and effort that would have been spent sifting through search results and websites.
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