Importance of adverse media screening

AMLYZE
Author
AMLYZE
Published
March 26, 2024
Adverse media screening

Today’s businesses operate in an increasingly regulated environment where managing reputational risk is critical and adverse media screening, among the myriad of risk management strategies, stands out for its ability to provide a clear lens through which businesses can view the public profiles of potential or existing customers or partners, particularly in relation to their mentions in the media.

By leveraging tools from companies such as AMLYZE, businesses can efficiently sift through vast media datasets to determine the reputational status of entities with which they interact, thereby ensuring compliance with prevailing anti-money laundering (AML) and know-your-customer (KYC) regulations.

This article explains the need for negative media screening and discusses some effective screening techniques.

Uncovering risks: The role of negative media screening

Adverse media, also known as negative news screening, refers to any unfavorable information that is publicly available about individuals or companies and that comes from newspapers, blogs, or other digital platforms. 

Such information often signals involvement in illegal activities such as bribery, corruption, counterfeiting, tax evasion, financial fraud, human trafficking, organized crime and others, including actual money laundering or terrorist financing. 

A sanctions check with a positive result raises the risk level to a maximum that triggers subsequent processes to terminate the relationship, while politically exposed persons (PEPs) and negative media alerts do not require onboarding to be stopped but rather to raise the risk level and adjust the risk mitigation plan accordingly.

The guidelines of the Financial Action Task Force (FATF) recommend the use of negative media checks as part of the enhanced due diligence process. In Europe, the 6th Anti-Money Laundering Directive (6AMLD) also requires banks to carry out enhanced due diligence on customers deemed to be high risk.

The adverse media screening process

Firstly, it is important to identify the scope of the adverse media screening, for example, to screen not only potential or existing customers, but also related parties, such as UBOs, representatives, including directors of intermediary shareholders, internet-banking users, business partners and similar.

Second, choose appropriate sources and databases against which systems will screen. Then, it is important to properly evaluate generated screening results, i.e. if the results are true or false positives, and to properly document the assessment of alerts.

It is also important to have internal controls, such as quality assurance controls, to ensure that employees properly close alerts with sufficient documentation and justification (for example, substance of adverse media should be properly evaluated, also differences in spelling due to abbreviations such as Ltd, Co, LLC for Limited, Company, Limited Liability Company should not be used to dismiss alerts, also it is not the best practice to not consider news older than 1-2 years as this will not allow to have accurate and complete view of customer’s risks and etc.).

Finally, it is important to take appropriate risk mitigation actions if necessary.

Resources for proper screening

The richness of data sourced for adverse media screening is directly proportional to its effectiveness. Here are some resources that could be tapped:

Data sources for adverse media screening
Data sources for adverse media screening
  • Regulatory databases: Regular disclosures by financial authorities about penalized organizations provide a treasure trove of data for negative media screening.
  • Enforcement agency resolutions: Enforcement agencies such as prosecutors, courts, or financial intelligence units (FIUs) publish resolutions that enhance searches by adding information about incidents recognized by trusted sources.
  • International database (IDB): Updated by various US institutions, the IDB provides demographic measures for countries around the world, aiding broad-based screening.
  • Trusted media: Articles or investigations carried out by research teams at media institutions recognized as trusted sources provide assured better coverage for a wider range of incident types.
  • Specialized websites: Some websites are dedicated to publishing negative media about financial crime and other illegal activities and serve as valuable resources.

Relation with customer risk assessment

Incorporating adverse media screening into customer individual risk assessment processes provides a detailed understanding of the nature and extent of crime associated with individuals or organizations. 

Adverse media may be incorporated into customer individual risk assessment through various methods, for example, not only raising customer risk score when manually reviewing automatic adverse media alert, however, also by implementing and developing dynamic customer risk scoring rules which would add certain defined score to automatic customer risk scoring matrix when certain number of adverse media alerts is generated for specific customer within specified timeframe, for example, in the last 3 months.

Advancing with technology: AMLYZE approach

From financial crime to terrorism, drugs, cybercrime, and fraud, adverse media data covers a wide range of criminal activity. Having software that can sift through this data quickly and accurately is invaluable.

In an age where new data is being generated at a rapid pace, manual scanning of negative media is impractical and prone to error.

In addition, information search engines are easy to manipulate, promoting more positive content to appear first and sources associated with unpleasant incidents to the back of the results queue.

Modern businesses are turning to automated negative media screening solutions such as those offered by AMLYZE. These tools speed up the scanning process and ensure accuracy, effectiveness and comprehensiveness in identifying potential risks associated with customers or partners.

Key takeaways

There are several benefits to using adverse media screening software:

Benefits from media screening
Benefits from media screening
  • Speed and efficiency: AI-powered software dramatically reduces the time spent on screening and quickly delivers accurate results.
  • Informed decision-making: By identifying links to criminal activity, adverse media screening helps organizations make informed decisions.
  • Customer re-scoring: Identified adverse media may result in changes of individual client risk group and also trigger event driven re-scoring.
  • Risk identification: Provides additional context about potential suspicious activity of the client.
  • Additional information about Source of Funds (SoF) and Source of Wealth (SoW): Helps to better understand if the source of funds and source of wealth indicated by the customer is potentially true and in line with the customer’s activity.
  • Risk mitigation actions: May prompt additional investigations not only of customers KYC data but also retrospective analysis of customer’s transactions for longer historical periods, for example, for the past 6 months, and after the investigation applying risk mitigation measures.
  • Regulatory compliance: Meeting industry and government compliance standards becomes more achievable with robust adverse media screening processes.
  • Reputation management: Early identification and mitigation of potential reputational risks helps to maintain a positive corporate image.

In summary, adverse media screening, especially when combined with PEP screening and sanctions list checks, provides a formidable shield against the reputational and regulatory risks faced by modern businesses.

Adopting effective adverse media screening tools, such as those offered by AMLYZE, is a strategic step toward maintaining a compliant and reputable business. Here you can have a look at AMLYZE’s capabilities in the area of adverse media screening.

About the author

AMLYZE
Author
AMLYZE
AMLYZE is a fully automated service created for the financial sector and businesses that are obliged to comply with AML/CFT regulations.

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