The compliance and risk management systems include negative news screening or rather adverse media screening which are very much needed in the current system. Financial crime is also an evolving template and is on the rise and the business world must bear in mind that they are not being taken unawares in opening accounts, continuing or staying business with individuals or organisations that indulge in crime. Identification of the first alarms as well as other details of the reputational, regulatory or financial risks, which may be recognized, are undertaken through negative media monitoring.
What is the adverse media screening?
Adverse media screening is defined as the process of finding the bad news or information about any organization or person, which might be located in publicly accessible sources. They include news articles, blogs, and press releases, and even the lists of regulatory enforcement. The point is to find out whether there is any linkage with the aspects of money laundering, fraud, terrorism finance, corruption, and other criminalized activities.
Financial institutions, fintechs, real estate corporations, crypto-exchanges, and even non-financial firms have simply been using adverse media screening as a due diligence measure to meet international regulations particularly, anti-money laundering policies and the Know Your Customer policies.
The necessity of carrying out adverse media screening
Traditional risk identification processes can be limited to the screening of official watchlist, sanctions or PEP (Politically Exposed Person) lists. The fact is that despite its predictive power, such things may not be a definitive image. The black media screening assists in sealing the loophole whereby it obtains illegal yet legal negative reporting that in most instances raise the red lights much ahead of legal action being taken or even the regulators carrying out investigations.
When additional regulators such as FATF, FinCEN and European Commission continue to press the business to ensure that they act positively in terms of detecting financial crime before it occurs; businesses are expected to act. Adverse media screening enables the real time identification of high-risk customers that pose risk of regulatory and reputational risk to a firm so that they become compliant and maintain their brands reputation.
The mechanism of how the Adverse Media Screening functions
The majority of the existing bad press monitoring systems are based on artificial intelligence (AI) and natural language processing (NLP) and enable real-time search of numerous media sources. Such solutions take up the context of contents to avoid some false positives, such as identifying the wrong people with the same names.
The screening may occur in different languages and jurisdictions using sophisticated systems. The screening can be either continuous or on an interval framework depending on the risk evaluation of the customer or partner. The information that would be retrieved would then be categorized to risk relevant classes such as financial crime, regulatory action, civil litigation and unethical behavior.
Challenges To Unfavorable Media Monitoring
Adverse media screening has pitfalls even though there seems to be a list of benefits. One of the serious problems is data overload. Manual reading of thousands of articles may be time consuming and resource demanding. Another problem is incorrect (false positive) identification of the output when it comes to screening of common names or the lousily graphical documentation.
Besides, there is a need to ensure businesses deliver the accuracy of data, and relevance, and timeliness of data. The use of obsolete sources, or the sources that have certain bias, can result in the unfair assessment of the risk or even in legal problems. This is the reason why one should choose a reputable service provider of adverse media search that possesses strong processing and verification capabilities.
The Industries which Can Benefit by Such Checks of Adverse Media
Of particular importance is the preventive screen of the media in the following areas, namely the banking, insurance, cryptocurrency, legal services, and supply management areas. To make an example, it can be used by banks to determine whether it is safe to provide a new client, but it can also be used as a crypto exchange to determine which user is the one who uses the dark web to exploit or commit digital fraud.
Another good use of adverse media checks in the business is in the real estate business to prevent cases of criminals laundering money through their purchases of property. There is as well intensifying pressure by companies to operate by rules which mandate the regulating authorities to serve continuous due diligence on the lifecycle of their customers instead of onboarding.
Regulations and International Standards
Regulators all over the world have drawn attention to adverse media monitoring. The Financial Action Task Force (hereafter FATF) recommends the use of the open source intelligence as part of the enhanced due diligence. 6AMLD of the European Union, US Bank Secrecy Act, and the AML regulations of the UK are also saying to the businesses to use the media data to use in the risk assessment of the business.
The firms that fail to engage in negative media screening will be penalized and even punished along with damaging their own businesses commercially. Businesses that involve the screening tools in their compliance processes are very keen to be transparent and in touch with regulatory compliance.
What can we Expect in Bad Media Scanning
Failure to be screened by the media will continue to get better as financial crime is getting sophisticated. The AI-services will be more accurate, multilingual and will point out fake news and respectable reporting. The negative news screening will be combined with other services, e.g., transaction monitoring, customer risk ratings, ID validation, etc. that will translate into compliance ecosystems that are wider.
Organizational entities will also shift to real time continuous screening models, even more than previously, so that the risk profile of entities remain up to date despite the on boarding procedures. Regulation of content is a phenomenon that will only pick up depending on what is expected of the media via the regulations. It will no longer be a choice to have adverse ads screened.
Final Thoughts
Negative media screening can prove to be a good instrument of the identification of the risk aversive and the reinforcement of AML compliance. The smart technology and reliable sources of media can help the companies be sure that they will not be exposed to the fines and reputational harm and the loss of money. The world is becoming more and more strict in the regulatory aspects thus an efficient and scalable system of adverse media monitoring is not an advantage anymore but rather a rule.
