Risk and Compliance (RAC)

What Is Risk and Compliance (RAC)?

Risk and Compliance (RAC) refers to the frameworks, processes, and technologies that help organizations identify, manage, and mitigate risks while ensuring adherence to legal, regulatory, and ethical standards.

In the context of channel incentives, RAC ensures that promotional funds—such as rebates, SPIFFs, and MDF—are distributed securely, fairly, and in compliance with financial and data protection laws.

Why RAC Matters in Incentive Programs

Channel incentive programs involve complex financial transactions, partner relationships, and data flows. Without proper RAC controls, businesses risk:

• Fraudulent claims
• Non-compliance with AML and BSA regulations
• Data breaches and privacy violations
• Audit failures and reputational damage

RAC ensures that incentive programs are secure, auditable, and aligned with global standards like GDPR, ISO 27001, SOC I/II, and AML/BSA.

RAC Across Verticals

Risk and Compliance (RAC) challenges vary significantly across industries. Each vertical faces unique regulatory requirements, operational complexities, and incentive program risks.

Understanding these differences is essential for designing compliant and effective channel strategies.

Key Components of a RAC Program

A strong RAC program is built on foundational components that work together to reduce risk, ensure compliance, and support scalable incentive operations.

From automation to audit trails, each element plays a critical role in protecting your brand and your budget.

Risk Identification

Mapping vulnerabilities across your incentive ecosystem—fraud-prone partners, high-risk payment methods, or data exposure points.

Risk profiling tools segment partners based on behavior, transaction volume, and compliance history.

Example: A reseller submitting unusually high SPIFF claims may be flagged for review based on historical benchmarks. If their claim volume exceeds the average by 40% without a corresponding sales increase, the system can trigger a manual audit.

Compliance Automation

Automated workflows enforce rules in real time—flagging duplicate claims, verifying recipient identity, and ensuring GDPR consent is captured before data is stored.

Example: A partner submits a rebate claim without the required invoice. The system automatically rejects the claim and sends a notification with a checklist of missing documentation, reducing manual review time and ensuring audit readiness.

Third-Party Risk Assessment

Includes onboarding checks (e.g., SOC II certification), ongoing monitoring, and offboarding protocols. Vet vendors and distributors for compliance and data handling practices.

Example: Before onboarding a new distributor, the system checks for ISO 27001 certification, reviews their compliance history, and assigns a risk score. High-risk partners are flagged for quarterly reviews, while low-risk partners are monitored annually.

Audit Trail Creation

Every incentive transaction should be traceable. Use timestamped logs and immutable records to track SPIFF disbursements and MDF approvals.

Example: A SPIFF payout is approved by a regional manager. The system logs the approval timestamp, user ID, and associated documentation. During an audit, this record can be retrieved instantly to verify compliance.

KYC/AML Verification

Know Your Customer (KYC) and Anti-Money Laundering (AML) checks verify recipient identity and ensure funds aren’t misused.

Example: A partner requests a large rebate payout. The system requires business registration documents, tax ID verification, and banking credentials before releasing funds. If any data is missing or mismatched, the payout is paused pending review.

Common RAC Pitfalls in Incentive Programs

These pitfalls can quietly erode margins, introduce compliance risks, and frustrate partners. Here’s how they show up in real-world scenarios:

• No Recipient Verification

Example: A partner submits a rebate claim using a generic email and unverified business credentials. Without KYC checks, the system processes the payment—only to discover later that the recipient was not a legitimate business entity.

Impact: Fraud risk, regulatory exposure, and financial loss.

• Untracked Gift Card Usage

Example: A SPIFF program rewards sales reps with prepaid gift cards but lacks tracking on redemption. Cards are distributed without audit logs, making it impossible to verify if they were used by the intended recipient. 
Impact: AML compliance violations and budget leakage.

• Lack of Audit Trail

Example: MDF funds are approved via email without centralized documentation. During a compliance review, the legal team cannot trace who authorized the spend or validate its alignment with program terms.

Impact: Legal risk and failed audits.

• Overextended Partner Networks

Example: A brand launches a rebate program across 200+ partners without segmenting by risk or performance. Low-performing partners dilute ROI and increase fraud exposure.

Impact: Inefficient spend and reduced program effectiveness.

• Manual Compliance Checks

Example: Claims are reviewed manually by a small team using spreadsheets. Human error leads to duplicate payments and missed fraud flags.

Impact: Operational inefficiency and increased error rates.

Best Practices for RAC in Channel Incentives

These practices are based on 360insights’ platform capabilities and industry benchmarks. [360insights.com]

• Use Secure, Trackable Payment Methods

360insights supports eight payment methods—including ACH, wire transfers, prepaid cards, and merchandise—with built-in AML compliance and audit logs.

Why It Matters: Ensures traceability, reduces fraud, and meets global financial regulations.

• Automate Identity Verification

The platform uses templated business rules and algorithms to verify claims against serial numbers, promotional codes, and documentation.

Why It Matters: Reduces manual errors, flags anomalies, and ensures KYC compliance.

• Centralize Audit Documentation

Every claim processed through 360insights is logged with timestamps, user IDs, and supporting documents.

Why It Matters: Enables fast, defensible audits and supports regulatory reviews.

• Partner with Compliance-Ready Platforms

360insights processes over 16M claims annually with 99.7% accuracy, saving clients $102M in non-compliance costs.

Why It Matters: Proven ability to reduce risk and improve operational efficiency.

• Align Incentives with Verified Business Outcomes

The platform allows segmentation by partner type, geography, and performance, ensuring incentives drive measurable growth.

Why It Matters: Maximizes ROI and supports strategic channel alignment.

Certifications That Matter

Certifications serve as external validation that your incentive programs meet industry standards for data security, financial compliance, and privacy. These frameworks help build trust with partners, reduce audit risk, and ensure your operations are aligned with global regulations.

Third-Party Risk Management

Third-party risk is one of the most overlooked areas in channel programs. Vendors, resellers, and distributors can introduce vulnerabilities if not properly vetted.

Vendor Vetting Checklist:

• Is the partner certified (e.g., SOC II, ISO)?
• Do they have a history of compliance?
• Are their payment methods secure?
• Is their data handling GDPR-compliant?

Ongoing Monitoring Strategies:

• Real-time alerts for suspicious activity
• Quarterly compliance reviews
• Automated partner scoring

RAC Technology Stack

Technology plays a pivotal role in enabling scalable, secure, and compliant incentive programs.

A modern RAC tech stack should include tools that automate verification, track transactions, and align incentives with regulatory frameworks—all while supporting partner segmentation and performance analysis.

Emerging Trends in RAC

As incentive programs become more complex and data-driven, Risk and Compliance strategies are evolving. Emerging technologies like AI and predictive analytics are reshaping how businesses detect fraud, manage partner risk, and stay ahead of regulatory changes.

AI in Compliance 

Predictive Risk Scoring

Uses historical data to forecast future risks and proactively adjust incentive structures.

Benefits:

• Prevent fraud before it happens
• Allocate resources to high-risk area
• Improve partner segmentation

Case Studies: RAC in Action at 360insights

Real-world results speak louder than theory. These case studies from 360insights showcase how leading brands have leveraged RAC strategies to reduce fraud, improve compliance, and drive measurable business outcomes across their incentive programs.

Claims Management & Fraud Reduction

• $3B annual volume of partner payments
• $102M annual savings from non-compliance
• 99.7% claim processing accuracy
• 16M annual partner claims processed

360insights uses templated business rules and algorithms to detect fraud, verify claims, and reduce false positives.

Consumer Rebates & Compliance

• 34% increase in participation rates
• 5%+ reduction in average decline rates
• 64% open rates on follow-up emails

360insights audits claims, reconciles payments, and analyzes transactions to detect fraud without impacting valid claims.

CooperVision

After switching to the Channel Success Platform™, CooperVision reduced average decline rates from 15%+ to single digits and improved rebate processing times to under 30 days.