Are regulators’ eyes on supply chains moving transparency up the agenda? By Chris Green
Regulators are sharpening their focus on global supply chains, and businesses are feeling the pressure. Whether it is the US citing national security concerns or the EU tightening ESG disclosure requirements, companies are expected to know who they do business with, and who those third parties in turn are connected to. This heightened scrutiny has turned transparency from a compliance box tick to a strategic necessity.
Tensions between global trading blocs compound the challenges. Shifting tariffs and geopolitical friction fragment supply routes and introduce new legal obligations. For business leaders, that often translates into more red tape and rising costs. But these regulatory demands also mark a long overdue correction. The complexity of modern supply chains, with multiple tiers, intermediaries, and opaque ownership structures, has long created a blind spot for illicit activity. Greater transparency is not only a regulatory imperative, but a competitive advantage.
Outdated tools increase risks
The traditional methods of managing third party risk, database screening, and manual web searches are not fit for purpose. These tools were built in a different era. Screening databases, adopted widely after the introduction of the USA PATRIOT Act and the EU’s Third Money Laundering Directive, were once considered advanced. Today, they are static, one dimensional, and increasingly prone to circumvention.
A key flaw in these databases is the ‘right to removal.’ High risk individuals and entities can petition for delisting, effectively erasing digital red flags. Meanwhile, smaller or shell companies in jurisdictions with limited corporate transparency slip through the cracks. Manual open-source intelligence, while richer in context, does not scale. As the number of entities businesses interact with grows, the ability of compliance teams to conduct meaningful due diligence is overstretched.
This is the environment regulators are responding to. In the US, the Department of Justice has issued updated guidance for corporate compliance programs that, for the first time, include the use of AI in risk management. A new bar is being set for what constitutes a modern and adequate compliance system, and it includes AI. Once again technology has changed the game, and expectations are rising accordingly.
Why AI is critical
AI is the only viable solution for managing third party risk at scale. Unlike legacy systems, AI can analyze vast volumes of unstructured data from local news sources and corporate filings to press releases and social media and distil meaningful insights in minutes. It identifies patterns, flags anomalies, and replicates the investigative work of a skilled analyst without the hours of manual effort. It means rather than understanding ten percent of your third parties, you can understand them all.
Context rich due diligence in minutes enables businesses to move faster and grow faster. Businesses don’t have to wait seven days for compliance teams to
approve vendors or clients. They clear low risk third parties in minutes and prioritize the ones that need review. Compliance teams can identify before they turn into reputational or legal liabilities.
With global data volumes projected to exceed 180 zettabytes this year, the scalability and accuracy of AI are essential. Specialist tools exemplify this shift. By combining smart resolution and risk classification technology with the power of summarization and prioritization, these platforms can deliver a full third-party report including a fraction of the time of traditional methods.
What is more, AI provides a new level of auditability. Regulators are asking how organizations use AI, whether they understand its limitations, and if it is embedded responsibly within their compliance frameworks. The ability to trace conclusions back to their source is essential.
Beyond compliance
Ultimately, supply chain transparency is no longer just about avoiding fines. It is about resilience and growth. Businesses that can see more clearly in their networks are better positioned to respond to disruption, operate with confidence in uncertain markets, and more importantly, grow faster. Regulatory pressure may have forced the issue, but transparency is fast becoming a competitive differentiator.
The days of relying on secondhand whispers or incomplete pictures of who you are doing business with are coming to an end. It is time for a clearer view.
Chris Green
Chris Green is the CEO of Xapien, a dynamic due diligence platform that global businesses rely on for transparency on their third parties. With more than 25 years of international experience, Chris is well positioned to lead Xapien as it strives to provide clear, transparent, and actionable information for business leaders.