Major & Principal Giving, Technology & Operations
BWF Services: AI and Data Science, Risk Management and Due Diligence

Philanthropic organizations are paying closer attention to the background of their donors.

In the past, donor due diligence was seen as a routine step so fundraisers could start stewardship sooner. Now, it’s a fundamental part of the fundraising lifecycle. Why? Because it’s much easier to prevent a donor scandal than it is to deal with the fallout later.

Recent donor scandals in the US and UK have involved universities naming buildings after individuals convicted of financial crimes, sparking media storms. These incidents not only tarnished the institutions’ reputations but also severely impacted their fundraising efforts.

Donor Due Diligence: Why It’s Important

Donor due diligence serves two purposes: to identify reputational risks and to help teams write comprehensive donor profiles. The problem is that due diligence often happens at the end of the process when organizations have invested time into building the relationship. Discovering too many reputation risks further on requires the organization to step back, wasting their resources.

This recently happened to an organization that invested years in building a relationship with a major donor set to contribute a $100 million donation. Upon conducting due diligence, they found numerous red flags and had to immediately put a stop to the relationship.

By having the ability to run due diligence right at the start of the process, it means that organizations can say “no” quickly and refocus their attention and resources on the right opportunities. More importantly, it avoids pulling in lots of teams and investing time in a relationship that could potentially go against an organization’s values.

Why Does Due Diligence Happen at the End?

Team capacity often forces due diligence to the final step because it demands a substantial time commitment to do thoroughly. Organizations commonly use Google, a powerful search tool that requires precise search strings to be effective. However, risk is highly complex, and risk-related search strings become outdated quickly due to subjectivity and constant changes in risk factors.

Using a single keyword like “scam” alongside a name results in an overwhelming number of search results. While databases offer tools for searching and categorizing information, the burden of sifting through “unstructured” data such as news articles and corporate blogs to determine whether it’s about their subject or not falls on the human researcher.

Even low-risk and low-profile subjects can require a day’s worth of research—looking into every detail can be more time-consuming than handling larger, riskier profiles. The bottom line is that searching and analyzing information from the entire indexed internet and compliance datasets scattered across different sources is simply impractical for most research teams.

How AI Can Streamline Due Diligence

Streamlining this important work is where AI makes a real difference. By allowing AI to automate the work, researchers can apply judgment to the information it surfaces. Embedding AI into the process enhances the work of a researcher so they can provide more strategic value to the organization.

AI has an incredible ability to ingest large amounts of information and summarize it. But there’s often a lack of trust because it tends to make its own conclusions, known as hallucinating.

When we first started to test generative AI within the Xapien platform, we could immediately see the potential. However, it would hallucinate. For example, when asked to summarize the interests of a high-net-worth individual, the AI mentioned swimming as a hobby.

When we looked into it, we discovered that the AI learned this from an article about the subject’s new mansion with a swimming pool. To prevent it from hallucinating again, we built a system of algorithmic safeguards using non-generative, non-machine-learning technology, which acts as a protective layer. Every piece of information links back to the source, so the user can verify it.

Where AI-Powered Due Diligence is Going Next

AI-powered due diligence is the future for researchers. This doesn’t mean that humans will be replaced. Instead, it will enhance their productivity so they can focus on the most valuable work and unlock their ability to provide more strategic advice for decision-making.

Xapien is an AI tool that handles manual research, analysis, and report writing. Our AI scours millions of registries and screening data, as well as trillions of web pages across the entire indexed internet. It extracts and contextualizes fragments of information about the subject. These findings are then compiled into a fully sourced, summarized report that teams can easily share with fundraisers and committees. To get started, all it needs is a name and some context. You can learn more about how increasing numbers of organizations are using Xapien here.

About the Author

Tom Dredge currently leads the sales and go-to-market strategy for the NFP sector at Xapien. He began his AI work at Google, where he helped clients understand how to work hand in hand with automated processes. Tom has since worked with several emerging technologies as well as launched and scaled go-to-market teams across EMEA (Europe, the Middle East, and Africa).