Compliance Travel & Expense Finance AI Did You Know?

The 3Ps of expense compliance verification: Pervasive, preventive and prepayment

by Gary Malhotra July 26, 2021

In this edition of our “Did You Know?” series, we look at the limitations of existing compliance verification and how to transform it into a pervasive, preventive and prepayment process. This ongoing series highlights the capabilities and benefits of AppZen Expense Audit, bringing you deeper into what makes it tick and how you can take advantage.

The Foreign Corrupt Practices Act (FCPA), enacted in 1977, generally prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business. The Bribery Act of 2010 (c.23) is an Act of the Parliament of the United Kingdom that covers criminal law relating to bribery. The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, and international narcotics traffickers. These are included in the Specially Designated Nationals (SDN) and other sanctioned lists.

Expense compliance verification for the Foreign Corrupt Practices Act (FCPA), Bribery Act, and Specially Designated Nationals (SDN) is key for finance departments to meet their regulatory obligations. 

However, more often than not, monitoring for such compliance is done selectively for a 5-10% sample of expense receipts and invoices, on a passive basis, after the payment has been made to employees. This implies that the odds of not catching a particular violation are 90-95%. Shocking, but true.

Associating with politically exposed persons or unauthorized foreign agents or entities can compromise an enterprise’s global reputation. Conflicts of interest that are discovered after the fact may lead to costly litigation and fines. And it’s hard to recover reimbursements that have already been made to employees and vendors.

Finance auditors and expense managers can benefit tremendously from proactively verifying 100% of expense reports and receipts prior to reimbursement being made. Using the 3Ps of expense compliance verification transforms the audit process into one that is pervasive, proactive, and focused on prepayment. Advances in Finance AI now enable continuous compliance monitoring, so finance teams can extract, read, and verify unstructured data on each expense report and receipt. They can even enrich it with intelligence from online and social databases, in-line, as each expense report is submitted, on a continual basis.

AppZen’s Mastermind AI identifies business attendees on expense receipts who may be politically exposed persons (PEPs) for FCPA and Bribery Act compliance, or who are designated as SDNs by federal authorities in the US and other countries. It also finds foreign entities identified as being on export control or needing special licenses requirements by federal authorities.

Mastermind AI finds and gathers thousands of data sources with the names of government officials, including news sites, US government sites, databases, and more. Using this information, it can determine whether the attendee named on an expense report is a PEP (an agent, politician, judge, military personnel, etc.), has ties to a government, or has had adverse news published that may cause a compliance issue.

Pervasive, preventive, and prepayment expense compliance verification are critical tools in any compliance toolbox. This is especially true for enterprises with any risk of exposure to sensitive security situations, making AppZen’s finance AI a powerful business ally.

Wondering what else AppZen Expense Audit can do? Check out the rest of our “Did You Know?” series, check out AppZen Expense Audit on the web, or reach out!

Gary Malhotra

Sr. Director of Product Marketing