Media is a powerful source for preventing financial crime. Journalists often draw attention to suspicious activities even before the regulatory authorities get involved or a trial takes place.
For case in point, reports of Wirecard's fraudulent schemes appeared on the web long before the German regulator BaFin began investigating their activities. As well as the "terrible criminal history" of Jeffrey Epstein, for cooperation with whom Deutsche Bank received a $150 million fine.
So companies that want to protect themselves from working with unreliable clients should pay more attention to information from the media. It will help to recognise red flags in time and prevent financial losses and damage to the public image.
This article will address adverse media screening meaning for businesses.
What Is Adverse Media?
Negative media or adverse media screening means searching for any publicly available information that may indicate the lack of reliability of a company or person with whom you are planning to cooperate.
For instance, it may reveal that the organisation has a history of corruption scandals, is subject to sanctions, or is involved in money laundering.
Working with such organisations is not only toxic but also illegal. In most jurisdictions, authorities are increasingly paying attention to the importance of negative media mentions for due diligence purposes.
Financial and banking institutions should be especially careful in checking potential partners. This is one of the most heavily monitored sectors, as it carries a high risk of transactions with ill-gotten funds.
Sources of Adverse Media
Any open sources are relevant for AMS. You should take into account all available pieces of data about a potential client or counterparty.
Here are some examples of sources to analyse:
- Broadcast media, i.e. mentions on television, radio, newspapers and news agencies.
- Online media, i.e. media that operates via the web.
- Social media, forums and blogs. Commonly used platforms include Twitter, LinkedIn, Facebook, etc.
- Investigative journalists help to uncover complex corruption schemes involving a long chain of shell companies and figures. Examples include the cases of the Pandora Papers and Panama Papers, which were brought to light by the International Consortium of Investigative Journalists.
- International and regional sanctions lists are another source that requires regular monitoring.
- Government databases, which may contain information on court cases, public procurement, company tax returns, bankruptcy, etc.
- News and information from state authorities may contain recommendations on KYC procedures. Also, websites of regulators, such as the UK Financial Conduct Authority (FCA), provide information on high-risk countries whose residents are recommended to be denied financial services or undergo in-depth checks.
As a part of a broader evaluation process, adverse media screening meaning goes in line with due diligence goals. It aims to form a complete picture of a potential client or vendor and to analyse all available data about them from the web.
Only then your business can be sure that the cooperation is safe and won't cause you any financial damage or legal issues.
What Kind of Information Constitutes Adverse Media?
Adverse media screening meaning can be viewed from several angles.
From an AML perspective, searching for references in open sources is all about complying with legal demands. In most countries, businesses are obliged to check the customers they work with.
The FATF recommends analysing negative media stories as part of enhanced due diligence. This means that this type of search is recommended for high-risk customers. It will help to create a more accurate profile of a potential partner and assess their risks.
Legislators and regulators listen to the international organisation when establishing local rules. For example, both the FCA and FinCEN note that media is an important source when evaluating a company or person.
Let's take a look at a few red flags that you might come across in news stories:
- History of financial crimes, such as corruption scandals, terrorist financing or money laundering.
- Presence on international sanctions lists.
- Questionable business connections.
- A mismatch between lifestyle and official income.
- Unexpected changes of address, type of activity, business owners.
It is worth noting that AMS is becoming increasingly important beyond AML/KYC checks in recent years. In today's business world, confidence in your partners is more than just a tool to prevent financial crime.
It is also an essential reputational component, as working with toxic firms or individuals can negatively impact your brand. The need to monitor the media is also growing in line with the trend of environmental, social, and corporate governance (ESG).
What Is an Adverse Media Screening?
This is a search and assessment of mentions of a brand or person using open sources. As part of this review, you need to make sure that your potential partner has not been mentioned negatively.
- As a party to financial crimes.
- As a sanctioned entity.
- As a subject to other criminal offences.
Cooperation with such figures carries many risks. Your company may face high fines for violating the law, damage its reputation in the market, and lose prospective customers.
Searching for negative publications is a part of EDD checks. It is usually carried out at the onboarding stage for a new client, and followed by regular monitoring.
Adverse Media Pitfalls to Avoid
Due diligence has a lot in common with detective work. To get to the bottom of it, the responsible employees in your company require good analytical abilities, an eye for detail, and technical skills. You also need to understand the limitations and weaknesses in your work.
After all, criminals do not stand still. They are constantly improving their schemes, hiding behind international jurisdictions and shell companies.
Here are some obstacles worth considering in your due diligence:
- Take into account the company's country of origin and operating language to avoid language barriers. If a customer approaches a UK bank but comes from a different country, you won't always find mentions of them in English.
- Avoid manual checks, as they decrease process quality and speed. Adverse media screening tools will help you handle the current data volumes. These automated systems can greatly reduce the routine workload for businesses, with AI analysis and automatic monitoring capabilities.
- Take into consideration the factor of fake news and yellow journalism. A company or a person may have been a victim of smear campaigns in the past that did not reflect the truth about their activities. For this reason, the assessment should be based on official, reliable sources.
Adverse Media in Banking
The banking sector is the main provider of financial services. That is why, when talking about media checks or negative media screening, we primarily think of these institutions.
Every year, countries impose stricter AML/CFT requirements. To avoid high fines, banks spend a lot of money to ensure that their customers are properly verified. The average bank spends $48 million per year on such measures.
Automated tools seem promising in this regard. They can accelerate the speed and quality of the process, reduce the number of human errors - and thus reduce expenses for businesses.
Adverse Media With LIGA UNITED
LIGA UNITED combines key information flows to give you confidence in each client or partner. Here you can access company files, check their presence on sanctions lists, and find negative media mentions.
Our features allow you to instantly check a company's or person's reputation in the media, look at how certain stories are developing, and compare several persons with each other. A flexible search system and filters let you formulate your query as accurately as possible.
Our adverse media screening solution includes the following media sources:
- Online business media, including news agencies, press, etc.
- Social media.
- Official government resources from the UK.
- Websites of TV channels and radio stations.
- And more...
We are constantly expanding our list of sources to ensure you don't miss any important news.
Here’s how it works:
- Enter your search keywords or a combination of keywords.
- Refine your search using filters.
- Get a list of articles that mention your subject.
We recommend regularly checking media mentions regarding your company and key speakers, companies and public figures you plan to cooperate with and current clients.
Get important information at your fingertips with LIGA UNITED!
The Bottom Line
Businesses are legally obliged to verify the clients to whom they plan to provide financial services. This requirement is primarily to prevent fraud, but it also helps companies avoid reputational risks.
With regulators imposing stricter requirements and an increasing amount of information, it is becoming more difficult for businesses to maintain the appropriate level of due diligence.
Adverse media screening tools can help with this task. They bring the working process to the next level, allowing you to instantly analyse all media mentions and monitor changes.
This is any piece of information from open sources that may indicate the riskiness of cooperation with a company or person. Sources include both traditional media and information from social media, blogs, etc.
Organisations can benefit from media screening even if it is not mandatory for them. This procedure can help you secure the status of a transparent and reliable company that doesn't do business with parties with questionable reputation. You can also protect yourself from cooperation with fraudsters who may steal your corporate assets.