What is Adverse Media Screening?

Adverse media screening is not only a compliance obligation but also an essential element in good business practice. Without due diligence in adverse media searches, there could be significant repercussions involving huge fines, loss of brand reputation, and disruption to operations.

• Regulatory compliance: Organisations are obliged to perform adverse media screening as an integral part of their KYC and AML programs³. Regulatory frameworks such as the FATF Recommendations⁴ have made the identification of negative information a key factor in efforts to combat money laundering and terrorist financing. Significant penalties and increased scrutiny by regulators may be imposed for failure to comply.

• Reputational protection: One association with a disreputable individual or entity can tarnish an organisation's image. It is a protective step to help businesses stay in the good books with their customers, investors, and stakeholders.

• Risk mitigation: Adverse media screening tools enable a business to identify potential risks early, such as links to criminal networks or fraudulent activities. Proactively dealing with such issues helps companies avoid lengthy and expensive litigation and financial risks.

• Better decision-making: With real-time access to adverse news and insights, organisations can make informed decisions at the time of customer onboarding, when entering into partnerships, or approving transactions.

Adverse media screening draws from a wide array of publicly available information sources. Powerful screening tools aggregate and analyse data from the following key sources:

• News media: Reports from reputable outlets often provide the first indication of criminal or unethical behavior. Major publications and investigative journalism frequently uncover activities that might not yet appear on official watchlists.

• Court records: Legal filings, lawsuits, and judgements provide valuable insights into possible liabilities or associations with criminal activities.

• Public registers: Publicly available corporate registries and land ownership records can often unveil hidden links or suspicious patterns that raise further investigation. With these additions, adverse media tools can provide wide coverage, enabling business entities to uncover unseen risks and protect their operations.

• Social media platforms: Social media platforms have the ability to uncover relationships, statements, or activities indicative of reputational or financial risk.

The designated categories of offences, derived from the Financial Action Task Force (FATF) recommendations⁴, provide a global framework for combating money laundering and terrorist financing. These offences are

• participation in an organised criminal group and racketeering;
• terrorism, including terrorist financing;
• trafficking in human beings and migrant smuggling;
• sexual exploitation, including sexual exploitation of children;
• illicit trafficking in narcotic drugs and psychotropic substances;
• illicit arms trafficking;
• illicit trafficking in stolen and other goods;
• corruption and bribery;
• fraud;
• counterfeiting currency;
• counterfeiting and piracy of products;
• environmental crime (for example, criminal harvesting, extraction or trafficking of protected species of wild fauna and flora, precious metals and stones, other natural resources, or waste);
• murder, grievous bodily injury;
• kidnapping, illegal restraint and hostage-taking;
• robbery or theft;
• smuggling; (including in relation to customs and excise duties and taxes);
• tax crimes (related to direct taxes and indirect taxes);
• extortion;
• forgery;
• piracy; and
• insider trading and market manipulation.

These categories serve as a foundation for identifying predicate offences and can be effectively used to structure adverse media screening. By aligning adverse media checks with FATF’s classifications, organizations can systematically assess negative information, identify high-risk individuals or entities, and ensure compliance with global AML/CFT standards, thereby strengthening their risk management processes.

Adverse media screening follows a set pattern that aligns with global compliance standards. Each step of the process is designed to minimise risks and ensure thorough due diligence.

1. Collecting customer data
   Accurate and complete data about customers is the basis for effective screening. Customer onboarding involves the collection of names, dates of birth, identification numbers, among other unique identifiers of an individual. This provides a proper background for adverse media searches and helps limit occurrences of false positives at the screening stage.

2. Running Adverse Media checks
   The adverse media lists and external databases are cross-referenced with customer data. Advanced screening tools, such as the dilisense Adverse Media Screening⁵, analyze vast amounts of data to identify potential risks in real time.

3. Evaluating results
   Screening results are reviewed for relevance and materiality. For instance, an archived news article regarding a customer's unrelated legal dispute may not be an existing risk, while a current link to fraud or corruption would be acted upon immediately.

4. Ongoing monitoring
   Risks are dynamic in nature. Adverse media screening is not a one-time affair; it requires constant monitoring to keep up with the latest developments, such as newly updated sanctions or newly discovered criminal activities. Automated tools can provide businesses with alerts when new adverse media is identified.

Adverse media screening is important in both KYC and AML programs for ensuring regulatory compliance with effective risk management.

• KYC integration
  During the KYC process⁶, conducting adverse media searches aids in identifying individuals and organizations engaged in criminal activities. This ensures that new clients or partners align with the company's established risk tolerance. By offering a comprehensive understanding of customer backgrounds, it establishes a foundation for continuous monitoring and risk assessment.

• AML framework
  Within AML compliance, adverse media screening complements other risk management strategies, such as sanctions and PEP screening, crimninal watchlist screening as well as transaction monitoring. Together, these tools create a comprehensive framework for detecting and preventing financial crime.

While adverse media screening is a powerful tool, it comes with several challenges that organisations must address:

• Data overload:
  The sheer volume of available data can make it difficult to identify relevant risks. Without advanced tools, businesses may struggle to distinguish useful insights from irrelevant noise.
• False positives:
  Automated screening tools often flag false positives, which require manual review and can strain compliance resources.
• Evolving risks:
  Criminals constantly adapt their tactics, making it necessary for businesses to update their adverse media screening practices regularly.
• Resource constraints:
  The implementation and maintenance of such robust screening systems do indeed come at a higher cost, especially for smaller organisations on a tight budget.

With modern technologies, adverse media screening has become more efficient and accurate. The main technological advancements in this area include the following:

• Artificial Intelligence (AI):
  AI-powered tools analyse patterns and detect risks that might be missed by human analysts.
• Natural Language Processing (NLP):
  Natural Language Processing means screening tools can analyse and contextualise data from several different languages, vastly improving the scale and efficiency with which operations run.
• Real-time monitoring:
  Automated systems ensure alerts about new adverse media coverage, which an organisation should look into in a very prompt manner for timely response.

In this respect, best practices for conducting adverse media checks should be performed to ensure efficiency.

1. Adopt a Risk-Based Approach⁷
   Prioritise high-risk customers and transactions to concentrate resources in areas where they are truly needed.
2. Utilize advanced screening tools
   Invest in tools that have a sufficient coverage and can be easily integrated with the current compliance system and update in real-time.
3. Keep data updated regularly
   Make sure customer data is accurate and current to minimise false positives and further enhance the accuracy of your screening.
4. Perform periodic reviews
   Assess the adequacy of your screening processes on a periodic basis to find areas for improvement.