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FCPA Travel & Expense Purchase Card

FCPA Compliance Needs More Than PEP Lists

on January 23, 2014

I used to think that for FCPA, Politically Exposed Persons (PEP) lists were “the bomb.” I thought that the lists were both a) required and b) THE key tool for companies to use to provide themselves both protection and some form of defensible coverage. Basically in the payables world (T&E, PCard, and AP), you use technology to match the PEP list to merchants, attendees and vendors. The bigger the PEP list, the more comprehensive the coverage. Unfortunately for anyone who has gone this route, they soon learn the meaning of “false positive” because they are overwhelmed with thousands of names that are potential matches, but almost none of those are true matches. Even when there is a true match, it is usually for legitimate purposes.

You notice that I said “used to think”. With Oversight Insights On Demand™ for T&E FCPA/Anti-bribery and Corruption Risk, I’ve completely changed my mind about how to perform FCPA monitoring and analysis.

Oversight has created a solution that takes a comprehensive, multi-dimensional risk-based approach to identifying high-risk employees, high-risk merchants, and high-risk countries. By triangulating across multiple types of data and combining multiple analytic techniques, one quickly sees the employees who are engaged in high-risk behavior (such as duplicate expense submission, circumventing receipt limit, and statistical outlier expenses) and those who are visiting high-risk countries (based on Corruption Perception Index rating and amount of spend in the country) and are dealing with high-risk merchants (based on risky country, amount, percentage and type of spend). This multi-dimensional analysis highlights not only the high-risk employees, but also the high-risk merchants and countries. The employees highlighted are candidates for additional training and continued high-risk actor monitoring. The high-risk countries identified give auditors guidance on where to start looking and provides the tools to do the investigation. The high-risk merchants that are identified give visibility into that class of merchant that isn’t necessarily a PEP affiliate, such as a travel agency in China, but which has become a cover for potentially illegitimate activities.

All of this value occurs before adding the PEP list lens to the process. When you add the PEP list on top of this, the risk is not just based on potential match but also based on other activities and analysis. Instead of chasing thousands of false positives, one can now focus on high-risk employees, merchants and countries with a more highly tuned level of risk.

It’s now clear to me that the more data that can be brought into the analysis and the more that different connections and analysis can be performed and correlated, the results are higher value and the protection is greater. PEP lists are an important component in anti-bribery and corruption analysis, but I am now convinced they are not the most important. Instead, they are best used with a multi-dimensional analytic approach such as Oversight’s solutions for FCPA.

Nathanael L’Heureux

Chief Client Officer