Managing Partner » It’s Risky To Automate Risk Profiling

It’s Risky To Automate Risk Profiling

December 10, 2018

Risk confusion business concept with a businessman on a high wire tight rope walking towards a tangled mess as a metaphor and symbol of overcoming adversity in strategy and finding solutions through skilled leadership facing  difficult obstacles.
Profiling third parties for risk in respect to the Foreign Corrupt Practices Act and other regulations is a tedious and difficult chore for compliance officers. Laws and requirements vary across jurisdictions, and the variety of factors that need to be considered is daunting. For example, under the Bank Secrecy Act alone, a bank has to look at the types of products and services offered by a money services business it deals with, locations, markets, anticipated account activity and the purpose of the account. The temptation to automate the process is understandable, but according to a post on The FCPA Blog. a system that automates risk scores without any customization may not be weighing risks in proportion to actual exposure. An assigned metric relating to risk shouldn’t be mistaken for a score that takes all factors into account. Even if the metric is capturing multiple compliance factors, they are likely not tailored to your specific business, which means they still may not be completely accurate or reliable.

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