Comment on page
Prevention involves actions, mechanisms and tools that reduce corruption risks, or increase the costs of corruption in ways that deter corrupt activity. Open data can be used in prevention across a range of sectors.
In the financial sector, governments have increasingly introduced Know Your Customer (KYC) regulations that require banks and other financial institutions to conduct due diligence checks what taking on a new client, or processing funds. Firms entering into new deals may also wish to carry out due diligence on potential business partners. These checks often involve:
- Identifying the owners and beneficial owners of a company client;
- Checking clients and their owners against a list of politically exposed persons or public officials;
- Checking clients and their owners against court records;
At present, these checks are often carried out using ‘black box’ private due diligence services. These services are often expensive (banks may pay-per-search), and often rely on a limited range of sources, such as media coverage, to flag up potential client risks. If the media have not reported on a given corruption case in the past, the due diligence databases might have a blind spot.
As more information becomes available as open data, and if government and private firms demand better quality due diligence, then there is scope for innovation in how these processes take place. However, it is important to note that many regulations and businesses processes for due diligence rely on documentary evidence. An entry in a dataset may need to be backed up by other sources of evidence before a bank or financial institution will make a due diligence decision based on it.
When interest and asset disclosures are filed on paper, it can be easy for politicians and officials to leave out certain disclosures, and simply hope these will not be detected. But when disclosures are published as structured data, it becomes easier to cross-reference between the information provided in a disclosure, and the information held in other sources, such as the company register.
This increase the complexity and costs of hiding information, and creates a pressure for more accurate disclosures.