Q&A with Dow Jones Watchlist Managing Director of Risk & Compliance

Rupert de Ruig is the managing director of risk & compliance for Dow Jones Watchlist (formerly Factiva Public Figures & Associates), the News Corporation company that last month published the top 10 public-office job roles with the greatest risk of involvement in money laundering, illicit payments, corruption, and other illegal activity.

Heads and deputies of state for national governments topped the list followed by senior members of the armed forces, national government ministries, and senior secret service members, respectively. I asked de Ruig how executives could tap the research, among other questions:

Eric Krell: Why and how did you develop the watch list of high-risk public office job roles?

de Ruig: Like all successful products the idea came to us in 2001 when we were approached by a global Swiss bank looking for a global list of Politically Exposed Persons or "PEPs."

PEPs are person entrusted with a prominent public function such as, heads of state, members of national parliament, and city mayors. These positions are important as history has shown the occupants of which have a tendency to abuse their power and get involved in criminal activity such as corruption. New global regulation decrees that financial intuitions must have processes in place to identify these persons and their immediate relatives and close associates and monitor their transactions and source of wealth for suspicious activity.

The Swiss bank approached Dow Jones during the Factiva joint venture because we had been helping our clients research people and companies for over 20 years. Our client believed our unique assets such as our global news archive of over 10,000 quality news sources and journalistic pedigree combined with our research standards and international business footprint gave us the assets to build such a database. Fortunately for us they were right!

EK: What surprised you most about the research?

de Ruig: One of the biggest surprises was that whilst the database proved very challenging to build it proved even more challenging to maintain. The political landscape is constantly changing with elections, resignations, scandals, and so on. To respond to this challenge, in 2002 we developed our proactive and reactive research methodology which enables us to respond to events but provides a systematic refresh of all the records on the database at a set timetable. The resulting data quality enables our customers to implement efficient and cost effective client checking programmes.

Another surprise was just how often the PEPs are implicated or convicted of serious crime. City Mayors, for example, who for some reason are not included in almost all the regulations, are number six in our global chart of corrupt officials. Heads of state, national government ministers, and members of the arms forces head the global list. It is worth stressing that geography has a significant influence here and in quite a number of countries these roles would be very low risk.

EK: What can executives at banks and other financial institutions learn from this research?

de Ruig: The key lesson learned is that not all PEP categories hold equal risk. In fact, U.S. regulators have commented to us that a risk-based approach to PEP screening makes more sense than lumping all PEPs into the same category. This has a significant business benefit as it means PEP screening does not require a dramatic increase in staffing to resolve a mountain of matches that some 3rd party lists produce.

EK:Does the database also help corporate finance executives in other industries?

de Ruig: [The] service is used by finance executives in high risk industries such as extractive (oil, gas, etc.), arms, defense, construction, and so on. These organizations need to understand the background of their business partners and customers to ensure they are not exposing themselves to legal or reputational risks.