But as the use of OSINT proliferates, so too do the legal and ethical questions surrounding its collection and processing. Legal and compliance teams must now face a growing web of privacy regulations and intellectual property (IP) protections. In particular, the General Data Protection Regulation (GDPR) in Europe and copyright laws across jurisdictions pose significant challenges for firms leveraging OSINT at scale.
This article explores the key legal considerations for regulated entities and compliance technology providers using OSINT for KYC, and how to navigate the compliance minefields without losing investigative efficacy.
OSINT in KYC: Why It Matters
Traditional KYC checks typically involve identity verification, screening against watchlists, and basic documentation. Yet financial institutions and regulated corporates are under increasing pressure to go further, particularly in high-risk relationships involving politically exposed persons (PEPs), adverse media, and ESG risks.
Open-source data allows compliance teams to:
- Detect reputational red flags missed by static databases.
- Identify links to controversial entities, industries, or jurisdictions.
- Map out indirect ownership or network connections.
- Corroborate information across multilingual sources.
In essence, OSINT enriches the risk picture and supports enhanced due diligence (EDD). However, the act of collecting, processing, and storing this data, especially on individuals, has implications for both data protection and IP compliance.
GDPR: The Privacy Lens
The GDPR, in effect since 2018, governs how personal data is processed within the European Economic Area. For OSINT-based KYC screening, this brings the following considerations to the fore:
1. Personal Data Is Still Personal, Even If Public
A common misconception is that information in the public domain falls outside the scope of GDPR. This is incorrect. If a piece of information, such as a newspaper article or a social media post, relates to an identified or identifiable natural person, it qualifies as personal data.
Even if the data was lawfully published by a third party, a separate legal basis such as the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 is required to process it in a new context. In the KYC space, the most common legal bases are:
- Legal obligation (e.g. AML regulations),
- Legitimate interests, balanced against the rights of the data subject,
- Public interest for certain regulated functions.
These laws impose duties that require the processing of personal data, which in turn provides a justification under GDPR Article 6(1)(c).
2. Transparency and the Article 14 Challenge
Where data is obtained indirectly (i.e. from OSINT sources), GDPR Article 14 requires that the data subject be informed of the processing. This is highly impractical in a screening context. Fortunately, there are exemptions, especially when informing the subject would require disproportionate effort or render the compliance objective impossible.
Nevertheless, firms must document their rationale for relying on such exemptions, and ensure processing is:
- Purpose-limited
- Minimally intrusive,
- Accurate and up to date
3. Data Minimisation and Storage
Collecting entire web pages or storing unnecessary contextual metadata may breach the data minimisation principle GDPR Article 5(1)(c). Compliance solutions must be engineered to retain only what is needed to support a decision and apply retention policies that align with AML and GDPR obligations.
Firms should also ensure that flagged data:
- Can be corrected if inaccurate,
- Is protected from misuse,
- Is not used for automated decision-making without human review.
Copyright and IP Concerns
In parallel with data protection law, intellectual property law, specifically by the likes of EU Copyright Directive 2001/29/EC and 2019/790, governs how content from third-party sources can be reused or redistributed. This is especially relevant for OSINT solutions that:
- Scrape content from news or subscription sites
- Store and present excerpts to users
- Use AI to summarise third-party material
1. Scraping vs. Licensing
Many commercial publishers prohibit automated scraping or republication in their terms of service. Even if content is technically accessible online, extracting and repackaging it, especially for commercial purposes, can violate copyright law and database rights.
Some firms attempt to argue that limited excerpts for due diligence purposes fall under “fair use” or “fair dealing” doctrines.
However, these are jurisdiction-specific, limited in scope, and not a blanket defence. As a rule of thumb, licensing is safest, and many compliance vendors now rely on partnerships with aggregators who have legal distribution rights.
2. AI and Derivative Works
Generative AI raises new questions around the creation of derivative summaries. If an AI model creates a synopsis of a paywalled article, is that a new, original work, or an infringing derivative?
Legal consensus is still evolving. Until clearer guidance emerges, firms should:
- Avoid copying the expressive elements of protected works
- Attribute sources
- Seek permission where feasible
- Ensure human review for compliance accuracy
Managing the Legal Risks: Best Practices
Legal and compliance teams working with OSINT-based KYC tools should implement the following guardrails:
1. Conduct a DPIA (Data Protection Impact Assessment)
A well-documented DPIA demonstrates accountability under GDPR and ensures the risk to data subjects is proportionate to the legitimate compliance aims.
2. Maintain a Legal Basis Register
Keep a record of which legal basis (e.g., legal obligation vs. legitimate interest) is used for each processing activity involving personal data.
3. Contract with Licensed Aggregators
If relying on third-party news or data sources, ensure appropriate IP rights are secured. This protects both the firm and its clients from litigation.
4. Layer in Explainability and Accuracy
Use AI explainability techniques to trace back risk flags to the original data and ensure data quality reviews are in place to limit errors.
5. Document Redress Mechanisms
Ensure processes exist to update or remove false positives, and that individuals have a route to challenge or clarify KYC findings.
Screening OSINT Responsibly
OSINT is a powerful enabler of smarter, more proactive KYC screening, particularly in an age where reputational, ESG and geopolitical risks are growing. But with power comes responsibility. Navigating the intersection of data protection, IP law, and financial regulation is non-trivial and the risks are real.
The most defensible approach is one that is proportionate, transparent, and technically sound. In a regulated environment, shortcuts are costly. But with the right architecture and compliance by design, OSINT can be deployed both legally and ethically to raise the standard of customer and supplier due diligence.
About smartKYC
smartKYC is the leading provider of AI-driven KYC risk screening solutions, serving financial institutions and multinational corporations worldwide. By combining artificial intelligence, linguistic and cultural sensitivity, and deep domain knowledge, smartKYC sets new standards for KYC quality, transforms productivity, and ensures compliance conformance.
To see smartKYC in action, please schedule a demo.
