Better compliance starts with better data: lessons from data engineering

When diving into the world of compliance, one might assume that the primary goal is simply to acquire good data. This belief is akin to a data engineer assuming that the key to successful data pipelines is sourcing perfect data. Spoiler alert: good data doesn’t exist. Both realms thrive not on the fantasy of immaculate data but on the art and science of cleaning and managing imperfect data.

The Myth of Pristine Data

In an ideal world, every dataset would arrive at our doorstep pristine, perfectly formatted, and instantly usable. Similarly, every compliance report would be a neat bundle of verified, unambiguous information. But in reality, both data engineers and compliance officers know that this utopia doesn’t exist. Instead, they face a cacophony of inconsistencies, inaccuracies, and missing pieces.

The Essential Role of Data Cleaning

Just as data engineering begins with the often Herculean task of data cleaning, compliance processes start with untangling a web of messy information. The notion that good compliance is about getting good data is a misguided one. It's not about finding perfect data; it’s about building robust systems that can handle the imperfections and anomalies.

Consider the task of identifying Ultimate Beneficial Owners (UBOs) in compliance. UBO identification is a cornerstone of anti-money laundering (AML) practices. The expectation might be that every entity has a clear and identifiable UBO. However, what about non-profits? Many non-profit entities don't have UBOs. Thus, a good compliance process must not only accommodate such exceptions but must be designed to recognize and appropriately manage these outliers.

Building Resilient Systems

Both data engineering and compliance must construct resilient systems that are flexible and adaptive. In data engineering, this means creating pipelines that can cleanse and standardize data, handle different data formats, and fill in missing values sensibly. It’s about setting up systems that are not derailed by unexpected data types or corrupted files.

In compliance, it's about developing processes that can absorb unclean, incomplete, or non-standard data. A good compliance system anticipates and accommodates variations and exceptions. It ensures that the process can still function effectively even when the data isn't perfect. For example, compliance checks must be able to flag and manage discrepancies in reported UBOs, handle cases where certain information is legally unobtainable, and verify data through multiple sources.

The Art of Making Do

Imagine a data engineer meticulously cleaning a dataset. They might encounter missing values, outliers, and inconsistencies. Instead of throwing their hands up in frustration, they apply various techniques to fill gaps, smooth out anomalies, and transform the data into a usable format. Similarly, compliance professionals don’t have the luxury of perfect information. They must verify, cross-check, and often deal with partial or ambiguous data.

"Finding clean data is like finding a unicorn – it’s a beautiful idea, but I’d settle for a reliable donkey any day." Someone with common sense, somewhere

Real-World Implications

The real world rarely fits neatly into predefined boxes. Non-profits without UBOs exemplify the kind of edge cases that compliance systems must handle. Just as data engineers build systems to gracefully handle unexpected input, compliance systems must be designed with the flexibility to address atypical entities and situations.

When compliance systems are built with the assumption of perfect data, they fail in the face of real-world complexity. But when they are constructed with robustness and adaptability in mind, they become powerful tools for managing risk and ensuring regulatory adherence.

Embrace the Imperfection

The key takeaway for both data engineering and compliance is to embrace the imperfection. Good data may be a myth, but effective processes for cleaning, verifying, and managing data are very real and very necessary. Good compliance isn't about having perfect data; it's about having processes that can turn imperfect data into actionable, reliable information.

So, next time someone suggests that good compliance is about getting good data, remind them that in both data engineering and compliance, the real magic happens in the cleaning. Because in the end, it’s not about the data you receive; it’s about what you do with it. And that's where the true skill lies.

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