Adverse media screening (AMS) is the process of monitoring the media for unfavourable or negative information about a customer or prospective customer. This includes both traditional outlets and less mainstream sources. Also commonly referred to as negative news screening or media monitoring, adverse media screening is an essential aspect of customer due diligence (CDD). This is because it allows an institution to spot potential problems that may arise from sustained business with a customer before it impacts its reputation.
Adverse media screening is mandated by law just as other compliance requirements like KYC and AML. It is increasingly becoming important in today’s digital age. AMS offers immense value to businesses as it helps protect their public image, forming an important aspect of a robust KYC and AML/ CTF program during onboarding and ongoing monitoring.
Why is Adverse Media Screening Important for Businesses Today?
Adverse media screening helps businesses achieve the following:
- Generate an accurate customer risk profile
- Protect the business from fines and compliance penalties
- Losing customer reliability and public trust
- Prevents negative press coverage and other risks that arise from the threat to the reputation of the business
What are the Challenges of Adverse Media Screening?
There are several challenges associated with adverse media screenings. They include:
- It requires a lot of time to constantly monitor media outlets, placing a burden on human labour as they may have to manually debate each alert.
- News travels fast due to technology and may be hard to validate at its early stages. This gives the business a ton of work in validating information after gathering.
- Constant monitoring of unstructured news is most often complex and expensive.
Adverse Media Screening Best Practices
The strategy for adverse media screening is generally unstructured and left to be interpreted and adopted by businesses depending on their peculiar needs. Some of the best practices to adopt include:
- Early assessment of risk appetite and subsequent measures to counteract such risks
- Screening efficiently and effectively at the right time
- Leveraging the right technology to manage workload and effectiveness
- Building smart checks based on reliable real-time news sources
- Creating and maintaining a thorough audit trail
- Setup an effective anti-financial crime culture across the business
Recommended - Adverse Media: How and Where to Check for Negative News
How to set up an Effective Risk Based AML System Leveraging Adverse Media
Adverse media is a global regulatory requirement as recommended by the Financial Action Task Force (FATF). In a nutshell, this makes it compulsory for institutions to implement as part of their AML/ CFT compliance. Regulated institutions need to perform adequate risk assessments of respective customers or businesses and then create a risk aversion or containment strategy. High-risk customers are to be subject to more thorough AML/ CFT scrutiny known as Enhanced Due Diligence (EDD).
According to the FATF guidelines, institutions should reflect the following as part of their AML/CFT screening:
1. Ultimate Beneficial Ownership:
Adverse media screening can help institutions identify the ultimate beneficial ownership of a business. This can expose the minds behind money launders disguised through corporate structures.
2. Terrorist Financing:
Reliable media outlets can be a source of information for terrorism stories. This can help institutions identify high-risk businesses or customers suspected of terrorism.
3. Politically Exposed Persons:
More often than not, news stories involving politically exposed persons (PEP) may be an indication of financial crime or corruption before it is confirmed through official means.
4. Ongoing Monitoring:
Adverse media screening plays a major role in establishing a successful ongoing transaction monitoring of customers. With the right real-time adverse media screening tool, institutions can easily identify changes in a customer risk profile, creating real-time solutions to address the threats in time.
Advanced Media or Negative News Screening for Businesses Today
The fast-paced nature of the industry today means that manual processes are tedious, time-consuming and ineffective. Businesses now favour an automated approach that raises a red flag when there a preset condition is triggered.
Leveraging AI-powered technology, adverse media screening can be used to easily monitor customer risk levels, giving time to create a reactive strategy.
See how 100+ leading companies use YV OS for KYC and AML screening of customers for compliance and real-time risk detection. Request a demo today.