Checking for adverse media is a crucial part of customer due diligence processes, aimed at uncovering any risks or allegations indicating an individual’s or business’ involvement in criminal activity. Being associated and having business relations with such parties can give rise to financial, reputational, and other types of risks to your business.
Onboarding clients with bad reputations or criminal allegations can put your organisation at risk of enabling money laundering and other unscrupulous activity. This not only opens your business up to fines, criminal proceedings and reputational damage, but can jeopardise the future success of your company entirely.
What is Adverse Media?
Put simply, adverse media is unfavourable news or information found in a number of reference sources. Generally considered to be news published by news outlets and wires, adverse media also includes other publications and sources that report on convictions, or alleged involvement in money laundering, terrorist financing, trafficking, sanctions and other illegal activity.
Adverse media sources can include traditional news sources and media, international databases of business and organisations, blogs, web articles and newswires including those which publish information on corruption and financial fraud.
What the Regulators Say About Adverse Media Screening
The global Financial Action Task Force (FATF) includes adverse media screening in its anti-money laundering guidelines, forming part of its recommendations that organisations implement a ‘risk-based approach’ to compliance in order to “target their resources more effectively and apply preventive measures that are commensurate to the nature of risks, in order to focus their efforts in the most effective way.”
Similarly, the UK’s Financial Conduct Authority (FCA) mirrors the guidance set out by the FATF, stipulating that media screening should be conducted when onboarding new customers and during periodic reviews of existing relationships.
In an open letter to financial institutions in May 2021, the FCA stressed the significance of comprehensive adverse media screening – and to reiterate the importance of following up on any, and all, allegations of financial crime against customers.
“We identified instances where firms failed to assess alerted transactional activity against the established customer profile to validate the source of funds for high-value transactions. In one example we saw, a firm failed to do this despite adverse media allegations that funds had been obtained through illicit means, and that failure placed the firm at significant risk of facilitating money laundering.”FCA Open Letter to Retail Banks, May 2021. Read in full here.
How to Check for Adverse Media
Adverse media screening involves monitoring global media sources for evidence of a customer’s involvement or alleged involvement in suspicious activity.
In today’s world, anyone online can become a publisher of ‘news’. The likes of Twitter, online blogging and forums such as Reddit can, pretty much, allow any of us to publish ‘news’. Though hearsay, gossip and rumours can soon become rampant, muddying the waters of legitimate, accurate news.
A critical step in screening for adverse media is to use reputable, credible and current news sources – whether official news outlets, government websites, judiciary databases, regulatory body updates or credible online media sources.
Using Modern Compliance Technology for Adverse Media Screening
Automated compliance technologies help businesses to swiftly analyse the deluge of information available today and alert you to key updates or flags on an individual or company. Using software for your adverse media monitoring can help you to focus on the most relevant alerts and significantly improve your ability to screen customers according to your business’ risk appetite.