The new compliance landscape
Government contractors now face a huge compliance challenge. What used to be simple supplier information gathering has become a critical business function with serious legal consequences.
New federal rules like the Financial Data Transparency Act (FDTA) and Federal Acquisition Supply Chain Security Act (FASCSA) now require strict supply chain checks and monitoring. These laws require contractors to:
- Do regular “reasonable inquiry” into all suppliers
- Review and update supply chain data at least every three months
- Make sure they aren’t doing business with banned sources
- Report data using standard identifiers
The risks are high. Contractors who fail to meet these standards face penalties, lost contracts, and damage to their reputation. Yet most organizations don’t have the internal ability to properly screen and monitor their vendors at scale.
Many companies still use outdated methods – manually pulling records from various sources or using information that vendors report themselves. This approach is both error-prone and too slow to meet current requirements. Even worse, it leaves businesses open to serious risks:
- Unknowingly doing business with sanctioned entities
- Missing hidden ownership structures that hide banned parties
- Failing to detect when suppliers become security threats
Harnessing data for risk management
The compliance challenge seems huge, but there are solutions; Standardized datasets that bring together official company records from government sources worldwide, creating a single source of truth.
Companies across industries are now using these resources to transform their compliance abilities:
- A RegTech provider integrated OpenCorporates’ API to automate entity verification, achieving 70% faster onboarding times while maintaining compliance standards.
- A risk screening platform connected to global company data to flag high-risk entities across jurisdictions, greatly improving their ability to detect hidden corporate relationships.
- An insurance company implemented automated verification to uncover red flags in applicants’ histories – like past bankruptcies or suspicious name changes – without slowing down their customer experience.
The implementation journey typically follows three critical paths:
1. Data integration
- Direct API access for technical teams
- Ready-to-use platforms with built-in data access for non-technical users
- Data services that combine entity data with risk screening
2. Process transformation
- Verify the legal identity of every counterparty
- Document ownership structures and key personnel
- Screen against sanctions and watchlists
- Implement continuous monitoring with automated alerts
3. Standardization through identifiers: At the heart of effective compliance is the use of standardized identifiers. The US government now requires the Unique Entity Identifier (UEI) for all contractors, while the Financial Data Transparency Act promotes the Legal Entity Identifier (LEI) for consistent entity recognition.
These consistent reference codes eliminate confusion about which legal entity you’re dealing with and enable efficient cross-checking with government databases and watchlists.
The implementation journey has its challenges. Data quality issues can happen when matching entities across systems, and technical integration may require outside help. However, user-friendly platforms have made implementation possible even for organizations without large IT teams.
Companies that succeed typically take a step-by-step approach, starting with their highest-risk vendors before expanding. They also focus on integrating verification into existing workflows rather than creating separate processes.
The compliance dividend
Organizations that successfully implement data-driven compliance report big improvements:
- 70% faster entity onboarding times
- Fewer surprises from hidden ownership structures
- Reduced compliance fines
- More scalable processes as vendor networks grow
- Greater confidence from regulators and stakeholders
But the benefits go far beyond compliance. These companies gain deeper insights into their business networks, make better-informed partnership decisions, and reduce the risk of supply chain disruptions.
The transformation creates a more resilient business that can:
- Quickly identify reliable partners
- Avoid high-risk engagements before they become problems
- Streamline operations by eliminating duplicate or outdated records
- Adapt quickly to changing regulatory requirements
The compliance function itself changes from a cost center to a strategic asset. Verification becomes embedded in standard procedures:
- New vendor onboarding automatically includes entity verification
- Procurement teams use risk data in selection decisions
- Documentation becomes standardized and audit-ready
- Continuous monitoring replaces periodic manual checks
For organizations ready to strengthen their compliance capabilities, the path forward is clear:
- Assess your current entity verification process and identify gaps
- Evaluate whether direct API access, third-party platforms, or managed services best fit your needs
- Start with high-risk/high-value suppliers for initial implementation
- Document your verification process with clear decision criteria
- Train procurement and vendor management teams on data requirements
The regulatory landscape will continue to demand greater transparency and due diligence. By implementing these practices now, companies can meet their obligations while gaining valuable business intelligence that protects and enhances their operations.
The question is no longer whether you can afford to implement robust entity verification. The real question is: can you afford not to?
For more information
Learn more about how OpenCorporates’ data can help you understand corporate structures and manage risk. Reach out for a demo or explore our services.
