Understanding Adverse Media Checks: Importance, Process, and Best Practices

Adverse media searches (also called negative news screening), often a crucial part of ongoing customer due diligence, help financial institutions identify potential risks and protect against financial crimes. But what exactly is adverse media, and why is it so important? And how does integrating adverse media screening into your sanctions screening process assist businesses combating money laundering and financial fraud?

What Is Adverse Media Screening?

Adverse media screening, also known as negative news screening, is a risk mitigation process employed to investigate and identify potential negative information about an individual or entity. This information is culled from publicly available sources with the intent to assess the subject's involvement in activities that could pose a threat to an organization's financial, legal, or reputational standing.

Adverse media, is a term used to describe any kind of unfavourable information that surfaces about an individual or a company. This information can be found in various sources such as newspapers, blogs, social media, and other public platforms.

The nature of adverse media is broad, encompassing a wide range of negative information. This could include involvement in financial crime, potential risk to a financial institution, or any other activity that could harm a company's reputation.

Why Adverse Media Checks are Crucial?

Adverse media checks are a critical tool in the arsenal of any business, particularly financial institutions, to safeguard against potential risks. While they are commonly used by financial institutions (to prevent money laundering) they are also used by other industries that need to assess risk, such as environmental or reputational risk. These checks serve as an early warning system, flagging any negative news or information about an entity that could indicate involvement in financial crime or other unethical activities.

Enhanced Due Diligence (EDD) and Adverse Media checks go hand in hand. They form a robust defence against potential financial fraud, ensuring that businesses are not unwittingly entangled in illicit activities.

Adverse media, as the name implies, focuses on negative news that could signal potential risks. When combined with EDD, it provides a comprehensive overview of the monitored individual or entity, thereby helping to deliver confidence in the due diligence process.

Ongoing monitoring is a key component of due diligence processes and AML compliance, helping businesses maintain their reputation and demonstrate their commitment to ethical practices.

How Does Adverse Media Screening Work?

The process of adverse media screening is a multi-step procedure that involves a series of actions to identify potential risks.

• Data Collection: The first step involves gathering relevant data about the customer or business partner from various sources. This data usually includes names, addresses, and other identifying information as part of the standard Know Your Customer (KYC) process.
• Adverse Media Check: Using the collected data, businesses then check various media sources for any negative information about the subject. This can involve scanning newspapers, blogs, websites, social media platforms, and other public sources. Many businesses use multiple tools and databases developed to streamline the adverse media screening process.
• Risk Assessment: If adverse media is found, the next step is to assess the severity of the risk. A risk assessment considers the type of negative information, its veracity, its timeliness, and its potential impact on the individual or business.
• Alerts and Action: If a severe risk is identified, an alert is generated. Depending on the institution’s policy and the severity of the risk, various actions can be taken, ranging from increased monitoring, to reporting the findings via a Suspicious Activity Report (SAR), to terminating the business relationship.

This process can be carried out manually or can be automated with the help of specialized software. Automated adverse media screening, often powered by machine learning models, can scan and review large numbers of watchlists, allowing businesses to review data accurately in less time. However, manual reviews are still necessary to validate the results and identify risks accurately.

Automated vs Manual Screening

There are two ways for businesses to conduct adverse media screening. Automated adverse screening, powered by machine learning models, can swiftly scan through large numbers of watchlists, using multiple tools and databases. It's a time-efficient method that can handle vast quantities of data, identifying potential risks with precision.

However, automated systems aren't perfect. They can sometimes flag false positives, marking innocent entities as potential risks. This is where manual review steps in. Trained analysts manually review the results to identify risks, distinguishing between true and false positives. They bring their expertise and experience to the table, making informed decisions.

But manual screening isn't advisable for a number of reasons:

• Vastness of Information: The sheer volume of data available on the internet, including traditional news, blog websites, and social media, can make the screening process overwhelming.
• Identifying Relevant Information: Not all adverse media is relevant to a potential threat. Sifting through irrelevant news articles to identify risks can be a daunting task.
• Changing Nature of Adverse Media: The dynamic nature of adverse media, with new information emerging constantly, can make it challenging to keep up-to-date with the latest developments.

However, with the right strategies and tools, it can be transformed into an effective way to mitigate risks and enhance compliance efficiency:

• Prioritise Relevance: Not all adverse media is relevant to your business or customer. Prioritising the relevance of the information can help streamline the screening process.
• Continuous Monitoring: Adverse media is not a one-time check. It's crucial to continuously monitor your existing customers and businesses for any new adverse media.
• Leverage Technology: Utilising technology can significantly improve compliance efficiency. UK companies are increasingly looking to automate adverse media screening to reduce customer onboarding time.

These strategies can help you conduct adverse media checks in a more effective way. Remember, the goal is not just to reduce risk, but also to ensure a smooth customer experience.

Final Thoughts

Adverse media checks play a pivotal role in today's business landscape. They are an essential part of due diligence, helping to identify potential risks and threats, and ensuring compliance efficiency. The use of multiple tools and databases, including machine learning models, can automate adverse media screening and reduce customer onboarding time.

Whether it's traditional news sources or blog websites, adverse media checks are an effective way to deliver confidence in your business relationships. They help to protect your organisation from financial fraud and reputational damage, making them an indispensable tool in the fight against financial crime.

To learn more about how our sanctions, PEP, and criminal watchlist screening service can support your organization's compliance program: Book a free Discovery Call.

Adverse Media Screening BETA Program

We are happy to announce the beta launch of our new Adverse Media Screening feature. If you are interested in taking part, please contact our Customer Success Team.

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