Tag: innovation in compliance

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Innovation in Compliance

The Digital Knowledge Graph with Evgeny Likhoded and Vladimir Ershov

This week’s guests are Evgeny Likhoded, CEO and founder, and Vladimir Ershov, Head of Data Science, of Clausematch. They join Tom Fox to talk about a groundbreaking new innovation, the Digital Knowledge Graph in open source. Learn how this game-changer is revolutionizing the way compliance is managed and what it means for industries, companies, and governments around the world.

Evgeny Likhoded is the CEO and founder of Clausematch, a global compliance and regulatory technology company. He started Clausematch to digitize and structure regulation and help regulators to innovate in the space. Jay has worked to solve a common problem in compliance – managing compliance documents and compliance content. He has brought all of the workflow and content management under one platform to provide compliance professionals a way to collaborate on content in real time.

Vladimir Ershov is the head of Data Science at Clausematch. He has been working in the field of data science for four years and previously worked at Apple. Vladimir is passionate about semantic linkage for law documents and was excited to join Clausematch four years ago to continue his work in this field.

You’ll hear them discuss:

  • The process of developing the Clausematch Knowledge Graph took a year with involvement from multiple teams and experts in the regulatory field.The process included discussions with regulatory experts, data preparation, model training and evaluation, and integration with Clausematch’s tools.
  • The key idea behind Clausematch was to capture data in a structured form from the start, allowing for more to be done with the data.
  • Clausematch was pitched to several financial services regulators, including FCA and ADGM, as a platform for tagging regulation text through expert work and machine learning models.
  • The open source Knowledge Graph generated by Clausematch can be used by other companies and regulators to automatically analyze regulations.
  • The structured regulations can also be applied to a financial institution’s internal compliance documents to identify gaps and contradictions in their policies.
  • The Knowledge Graph helps digitize the meaning of regulations. 
  • The models can be used to look for patterns in regulations and to show regulators if internal policies are compliant with regulatory rules.
  • The ultimate goal is a world where every regulation is structured and consumable via API. The release of the Knowledge Graph in open source will help reach the goal faster.
  • Knowledge Graph technology is relevant to compliance technology. Historically, compliance solutions have been focused on formalizing rules and processes into a framework through manual means. Knowledge Graph technology automates the process of structuring data and extracts entities and obligations to form the framework.
  • Neural network models or reinforcement learning agents can be run on top of the extracted graph to look for compliance patterns.
  • The knowledge graph technology will be available on Clausematch.com and GitHub, and a scientific paper with more information will be released.
  • The graph structure is important in compliance due to the need for exact inference in compliance, unlike the correlation approach in language models like GPT.

 

KEY QUOTATIONS: 

“There is a principal flow in the models like ChatGPT and other language models which are based on correlation approach… [but] in the compliance field we need causation, we need exact inference and that’s why the graph structure is extremely important to be able to build the automation for the compliance.” – Vladimir Ershov

 

Resources 

Evgeny Likhoded | LinkedIn 

Vladimir Ershov |  LinkedIn 

Clausematch

Knowledge Graph Information

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Innovation in Compliance

Compliance and the Chain of Value Creation with Simon Severino

 

Simon Severino studied philosophy at the University of Vienna and later became a business coach at a global consultancy. Two decades of experience led him to found his own consulting firm, through which he now advises business leaders about market strategy via his Strategy SprintsTM Method. He and Tom Fox explore his signature methodology and how it translates into creating value in the compliance space.

 

 

The Problem of Strategy

Simon tells Tom that the problem was how to create strategy. There are tools to analyze the market and figure out how to enter it. However, the tools to build an organized, aligned team that gets feedback quickly were missing. Since the executive team is removed from the market, they don’t have closed loops. “For the last 15 years, I’ve been obsessed with just building that [tool],” Simon comments. “How can an executive team have an agile way of doing things so it feels like a sports team? That’s what I’ve been building. That’s now the Strategy SprintsTM Method and the Strategy SprintsTM Company and the Strategy SprintsTM product, which is 90 days coaching of executives.”

 

The Chain of Value Creation

“I always see the whole chain of value creation or the chain that really matters,” Simon says. The chain doesn’t stop at his clients; their clients are part of the chain as well. He says that compliance officers should consider how they can become a valuable contribution to the whole chain. He suggests that they see themselves as business partners. “Always see yourself as a business partner of your internal colleagues and… everybody serves the client out there.” Tom responds that putting the customer first translates into greater profitability. It means you become a business generator instead of a cost center, he tells Simon. They discuss Peter Drucker’s contribution to the practice of management, and how he influenced Simon’s work. “My whole work is Peter Drucker’s philosophy plus agile methods for the digital age,” Simon comments. The concept of efficiency vs effectiveness is one of Drucker’s principles he adopts: “Spend more time on effectiveness, finding out what’s the right thing to do in the first place.”

 

Strategy SprintsTM 

Tom asks Simon to talk about the key points in his book Strategy Sprints: 12 Ways to Accelerate Growth for an Agile Business. Simon responds that it’s about asking yourself what is the right thing to do now. In today’s digital age, with broken supply chains and volatile markets, it can be difficult to make decisions. The book provides case studies and blueprints for taking the right actions in various areas like operations, marketing, sales, hiring, and client onboarding. Many CEOS today are talking about how to renegotiate contracts so that they reduce the risk of something going wrong. They can do this by splitting the risk and making sure that costs are variable instead of fixed. This will help them be more prepared if something does happen. “Risk management is the highest art form when you run a business because everything is risk/reward ratio,” Simon comments. “You have to become very good at weighted probabilities.” He explains why he thinks Elon Musk is a master of risk management, and why it’s the safer way to build a business.

 

Resources

Simon Severino on LinkedIn

Strategy SprintsTM | Website | Book

 

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Blog

Farewell to Dr. Shirley McBay and the US Strategy on Countering Corruption – Innovation Going Forward

We are exploring the recently released the United States Strategy on Countering Corruption (the “Strategy”); subtitled “Pursuant To The National Security Study Memorandum On Establishing The Fight Against Corruption as a Core United States National Security Interest”; in response to President Biden’s prior declaration of corruption as a national security issue of the United States.  Over this 5-part blog series I have delved into the Strategy and considered how it will impact the compliance professional. We have considered Pillar 1, modernizing, coordinating, and resourcing US government efforts to fight corruption. Next, we took up Pillar 2, curbing illicit financing. With Pillar 3, we looked at holding corrupt actors accountable. Under Pillar 4, we looked at preserving and strengthening multilateral anti-corruption architecture. Today, we conclude our series by looking at Pillar 5, Improving Diplomatic Engagement and Leveraging Foreign Assistance Resources to Advance Policy Goals.
First, however, we celebrate the mathematician Dr. Shirley McBay. Mathematics professors rarely have obituaries in the New York Times (NYT). Dr. McBay was the first African American to garner a PhD from the University of Georgia. After receiving her degree she taught at Spelman College, turning it into a powerhouse for mathematics, where even today, “more Black women with doctorates in science and engineering have undergraduate degrees from Spelman than any other institution.” From Spelman, McBay moved to “the National Science Foundation, where she developed and ran a program to help minority-focused institutions improve their course offerings and research capacities. Five years later, she moved to M.I.T.” At M.I.T., she “made her greatest mark on her field as the dean of student affairs at the Massachusetts Institute of Technology in the 1980s. She confronted the challenge of bringing more students from underrepresented minorities into science, technology, engineering and math, both at her university and in higher education broadly.”
The US will elevate diplomatic engagement through five steps. They include:

  • Diplomatic engagement. The US government “will elevate anti-corruption as a priority within its diplomatic and public diplomacy efforts”, focusing local conditions. Additionally, it will ramp up its support for “governmental and nongovernmental actors combatting corruption through bilateral and multilateral contexts.”
  • Expand assistance. The US government will expand its anti-corruption assistance and will monitor and evaluate its efficacy throughout the process.
  • Anti-corruption considerations. There will be an integration of anti-corruption considerations across a wide variety of areas such as “development assistance, including global health, anti-crime and rule of law, conflict and fragility, and humanitarian assistance.”
  • Rule of law. There will be “new and expanded foreign assistance programs to enhance the capacity and independence of oversight and accountability institutions, including legislatures, supreme audit institutions, comptrollers, and inspector generals.” The government will focus on tools, procedures and programs to “follow the money.”

In a most-welcomed initiative, the US will work to protect those who report on and blow the whistle on bribery and corruption. It will do so in a variety of ways and through several different initiatives. They include support for journalists by deploying new and existing “programming to respond to rapidly evolving threats to, and harassment of, reformers, journalists, and other
anti-corruption change agents” There will be increased education in the global ABC community about existing global emergency assistance programs, which can provide short-term financial assistance to whistleblowers or others “who have been threatened or attacked for their work, including those engaging in anticorruption or transparency efforts.” The US government will work to counter nuisance suits against journalists and activists and will work such programs and policies. When possible, the US will coordinate actions with partner countries taking similar steps.
Next the US will use innovation as a key to be combating corruption. This innovation can come through the use of technology to prevent, detect and remediate issues before they become corruption issues. It can also take the form of a rapid response team and tools to “emerging areas of increased risk for corruption. Allowing for more agile response capabilities among partners will provide increased critical assistance, particularly to new democratic and reform-minded regimes and global civil society partners, as they more effectively investigate, prosecute, and adjudicate corruption and kleptocracy; and better address the role corruption plays in facilitating transnational organized crime and malign influence from state actors.” In the arena of ‘new domains’ the US government will consider “how to further incorporate a transnational lens into its anti-corruption foreign assistance, including by expanding support for international networks of investigative journalists, civil society advocates, and criminal justice practitioners.”
Finally, near and dear to the heart of every compliance professional, the US will direct a wide swath of the US and others to create better tools for and use risk assessments. This will help not only to identify where corruption issues may arise but to help deploy, on a proactive basis, strategies to prevent, detect and remediate any such issues. Here the US “will review existing approaches to assessing and addressing corruption risk in development and humanitarian assistance, evaluating whether gaps exist in current frameworks; and whether those frameworks need to be more robustly implemented.” There will be pilot programs to effectuate change through a “proof of concept” to determine best practices “for future interagency collaboration in using foreign assistance to combat corruption, and to pursue innovation, experimentation, adaption, and reflection on existing approaches.”
This final Pillar demonstrates the government has learned by working with private sector players, many of the lessons of best practices in compliance. The use of innovation such as data and technology have been a mainstay on corporate compliance programs for several years. Even the discussion around risk assessments in this Pillar derives from the Department of Justice’s (DOJ) Evaluation of Corporate Compliance Program and its update. All of this means not only collaboration with the private sector but an opportunity for the private sector to garner lessons that the US and other governments learn in this truly international fight.
The Strategy on Countering Corruption is both welcomed and should be celebrated by every compliance professional. The Strategy does not simply elevate the work of compliance to the US and indeed international arena but the ongoing interplay and interaction between the public and private sector will lead to innovation, enhancement and truly international engagement in the worldwide fight against bribery and corruption.