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 check the public profiles of potential or existing customers or partners. Particularly in relation to their mentions in the media.
Using tools from companies such as AMLYZE, organisations can efficiently sift through vast amounts of media data. And to determine the reputational status of entities with which they interact. This ensures compliance with current 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 media, refers to any unfavorable information that is publicly available about individuals or companies. It can come from newspapers, blogs, or other digital platforms.
Such information often indicates involvement in illegal activities. Such as bribery, corruption, counterfeiting, tax evasion, financial fraud, human trafficking, organised crime and others. And, of course, 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. On the other hand, politically exposed persons (PEPs) and negative media alerts do not require onboarding to be stopped, but rather the risk level to be raised and the risk mitigation plan to be adjusted accordingly.
The Financial Action Task Force (FATF) guidelines 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
First, it is important to identify the scope of the adverse media checks. For example, not only potential or existing customers should be screened, but also related parties. Such as UBOs, agents, including directors of intermediary shareholders, internet banking users, business partners and the like.
Secondly, appropriate sources and databases must be selected against which the systems will screen. Then it is important to properly evaluate the screening results generated. For example, whether the results are true or false positives, and to properly document the evaluation of alerts.
It is also important to have internal controls, such as quality assurance controls. Ensure that staff close alerts properly with sufficient documentation and justification. For example, the content of negative media should be properly evaluated. And spelling differences due to abbreviations such as Ltd, Co, LLC for Limited, Company, Limited Liability Company should not be used to dismiss alerts. It is also not best practice to disregard news that is older than 1-2 years as this will not allow an accurate and complete view of the client’s risks, etc.
Finally, it is important to take appropriate risk mitigation actions if necessary.
Resources for proper adverse media screening
The richness of data sourced for adverse media checks is directly proportional to its effectiveness. Here are some resources you could tap into:
- 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 publish resolutions that enhance searches by adding information about incidents recognized by trusted sources. This is done by prosecutors, courts, or financial intelligence units (FIUs).
- 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 by research teams from media organisations that are recognised as trusted sources. They are guaranteed to provide better coverage of a wider range of incidents.
- Specialized websites. Some websites dedicate themselves to publishing negative media about financial crime and other illegal activities, serving 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.
You can incorporate adverse media into individual customer risk assessment in a number of ways. For example, not only by increasing the customer risk score when manually reviewing automatic adverse media alerts, but also by implementing and developing dynamic customer risk scoring rules. These would add a certain defined score to the automated customer risk scoring matrix if a certain number of adverse media alerts were generated for a particular customer within a 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 generates rapidly, manually scanning 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. Tools like customer or payment screening speed up the scanning process and ensure accuracy, effectiveness and comprehensiveness in identifying potential risks associated with customers or partners.
Benefits to evaluate
There are several benefits to using adverse media screening software:
- 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 SoF and SoW given by the customer is potentially true. And whether it is in line with the customer’s activities.
- 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 checking processes.
- Reputation management. Early identification and mitigation of potential reputational risks helps to maintain a positive corporate image.
Key takeaways
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 customer or payment screening for adverse media.
