Comprehensive data compliance based on valid data reliably protects companies from conflict situations

Companies that work with personal and other sensitive data must comply with a wide range of legal and regulatory requirements. These regulations ensure that the data is protected against loss, theft and misuse, but also that no transactions take place with partners who are subject to sanctions, for example.

Compliance management helps with this challenge of complying with both the company's own internal and self-imposed guidelines as well as the legal provisions on data use in the relevant fields of activity. If data compliance is firmly established in the company, it can reduce a company's liability risk and protect against reputational damage caused by breaches of the rules. What's more, fines can sometimes reach a level that threatens a company's existence.

A compliance management system can identify risks and prevent violations. It also includes, for example, the prohibition of transactions with suspicious persons and companies on sanctions lists. Non-compliance can result in severe fines and legal consequences. Or money laundering is to be prevented by recording and reporting cash transactions above a certain amount.

A compliance management system must cover many aspects

The numerous areas of application of data compliance show how important and complex it is:

• Fraud defense
  For various fraud strategies, such as phishing, compliance defines potentially suspicious keywords or interactions that indicate fraud. The compliance management system can then filter for these.
• Combating money laundering
  Banks and credit institutions must ensure that they act in accordance with the applicable Money Laundering Directive. This requires data to be kept in an audit-proof manner and business partners to be checked in the transparency register.
• Sanctions and terror lists 
  Companies may not do business with persons or organizations that are on sanctions and terror lists in order to prevent the financing and promotion of terrorist acts.
• Prevention of corruption
  Companies should avoid transactions with politically exposed persons (PEPs). These are people who pose an increased risk of corruption or other illegal activities due to their position in government, administration or public institutions.
• Liability for product misuse 
  Originally designed for civilian purposes, so-called dual-use products can also be misused for military purposes. It is therefore important to observe the legal framework for their distribution and to comply with export restrictions.

Attention: Embargo

It is impossible to manually compare customer, supplier and partner data with national and international embargo and sanctions lists in real time. More and more transactions are taking place. The workload is constantly increasing due to political developments. However, carrying out incomplete or even random checks for capacity reasons is not only negligent and sometimes morally questionable, but also entails major risks. Depending on the sector, there is the threat of severe fines, Bafin reprimands or even reputational damage - and in the worst case, an embargo and other sanctions.

Poor data quality encourages breaches of data compliance

Insufficient risk prevention and inadequate data management, for example, often cause compliance breaches. Attentive precision work is required in the process, as the error or even the attempted fraud is often hidden in the details. Hits of risky data can be hidden in the individual address data, in the name or in other fields, such as the purpose of a bank transfer. Keeping data inventories error-free, up-to-date and of high quality is a basic prerequisite for careful data compliance. Complying with all requirements in real time is complex. A particular challenge and frequent cause of errors is the merging of external databases into an existing system, for example in the course of a merger - here, a closer look must be taken at compliance with the requirements during the migration process.

However, poor data quality can also lead to a false alarm. In the "false positive" phenomenon, a faulty file falsely triggers a transaction stop, for example. This leads to delays and additional work for verification and approval. Customers react angrily or with uncertainty.

The compliance management system as a safety net

What is needed for reliable data compliance management? Important factors are:

• Risk analysis
  A comprehensive risk analysis is the starting point for successful compliance management. Potential risks and threats must be identified in order to develop and implement effective control measures.
• Compliance guidelines
  Companies should have clear compliance policies and procedures that are understandable to all employees. These policies should be updated regularly to reflect changing laws and regulations.
• Training and awareness
  It is important that all employees are informed about the company's compliance policies and procedures and are trained to avoid breaches. The GDPR, for example, requires annual employee training, which must also be demonstrated to the legislator.
• Monitoring and reporting
  Compliance management must regularly monitor whether the compliance guidelines are being adhered to and ensure that an efficient reporting system is in place to report breaches. An automated check using batch processes, for example, helps to meet the requirements of blacklists. A sanctions list check is an essential tool here.
• Sanctions and corrective measures
  Companies must establish clear sanctions and corrective measures for violations of compliance guidelines to ensure that misconduct is dealt with appropriately.
• Risk management
  Effective compliance management also includes the implementation of risk management strategies to minimize the risk of violations of laws and regulations.
• Compliance culture
  A compliance culture that views compliance with laws and regulations as an integral part of the organization's business practices is critical to effective compliance management.

If companies have woven a safety net in this form, that is already half the battle. What is still missing is a high-quality database.