Media is an important resource for the customer due diligence (CDD). Many financial institutions are checking news mentions of their clients and partners for any suspicious activity or cooperation risks.
Adverse media encompasses all negative publications about a customer or a company. Mentions of involvement in financial crimes, corruption scandals, terrorism or money laundering are of particular importance for financial institutions when evaluating a client. A large array of such materials is a signal that cooperation with the business should be suspended.
It is worth noting that there are no detailed instructions on to what extent media coverage should be analysed in the know-your-customer procedures, so companies determine this need on a case-by-case basis.
This article will help to understand how to implement media as a part of client checks and what software will help you perform this task.
What Is an Adverse Media Search?
All open data sources are valuable when it comes to the world of due diligence and compliance. As demands from regulators are constantly growing, companies are putting more emphasis on media monitoring, alongside with checking sanction lists and financial records of their clients.
Adverse media search means finding out how a potential client is mentioned online. Such screening is carried out to evaluate whether it is possible to cooperate with a person or a company.
Has the individual/company in question provided complete information about themselves? How transparent is the origin of their funds? Are there high-profile career scandals or other "skeletons in the closet" in their history? Are there any facts that indicate that your company is at risk of being involved in criminal activity if it starts cooperation? Checks are made in order to answer all these questions.
But in a modern hyper-connected world, manually analysing mentions is nearly impossible. The number of news sources is constantly growing, as is the speed with which publications are updated. To search important pieces of information on customers and learn about changes in time, companies use automatic monitoring systems.
Try LIGA UNITED to check individuals and companies in a couple of clicks and always be sure of cooperation. The system includes all key resources that require control, including international news agencies, online media and business outlets.
Sources of Adverse Media
The media is one of the most dynamic and diverse areas of modern society. This area has undergone dramatic changes over the past decades, and if earlier it was enough to follow the radio, newspapers and TV channels, now a wide variety of online communication platforms have been added to the list.
This state of affairs complicates the search for negative media mentions, and it becomes even more difficult to see the full picture regarding a client or business partner. Here is a rough list of resources that companies need to check:
- Broadcast media (radio and TV).
- Offline and online press, news agencies, business media.
- Social networks and blogs, podcasts, forums.
- Official sources (information on official websites and social networks of government bodies).
- Investigative media, etc.
Fortunately, the regtech industry offers many tools for analysing large amounts of data and enhancing KYC screening. Order a LIGA UNITED demo to find out the full list of media that you can control automatically.
Adverse Media Challenges and Mistakes to Avoid
Analysing the public image of customers and making conclusions about their credibility can be challenging. Here are several details to consider while conducting your search:
- Be cautious of sources and content that you are working with. Unverified sources — such as unknown websites or suspicious social accounts — are a fertile ground for spreading fake news, both on political and business issues. Thus, make sure that your company makes decisions based on reliable pieces of information — well-established news agencies, global business magazines, official governmental sources, etc.
- Be aware that manual search is very unlikely to yield results, and will take a lot of your time. Every day the world produces 2.5 quintillion bytes of data, which is comparable to 10 million blu-ray DVDs. Operating with such a speed and volume requires specialised software.
- Make sure you use relevant search queries for the particular case, and set up notifications where necessary. Unrelated alerts/queries can take your team's time away from other tasks. For some clients there might be an additional layer of complexity, when searches are performed in a foreign language.
- Use common sense and “investigative intuition” to develop the procedures that work best for you. The regulatory base is by far vague when it comes to adverse media screening, and lacks exact instructions from standard setters and authorities. As such, the risks posed by an individual client can be used to gauge what steps to take during your investigation.
Adverse Media Regulations: Where to Start?
Adverse media checks are to date envisaged within general regulations for Customer Due Diligence. As a golden standard in this area, experts recommend to follow case-by-case scenarios for each customer — and, depending on risks, to decide if in-depth check is necessary. Since media searches are no different, some categories of clients will be carefully checked, such as PEPs, foreign residents, individuals with a corruption trail, etc.
Here are the major legal requirements and recommendations, on which financial organisations rely on when running media checks:
- Guidelines by the Financial Action Task Force (FATF) as a global watchdog for financial crimes.
- Anti-Money Laundering Directives (AMLDs) are regulations issued by the European Union, with most recent 6AMLD came into effect on June 3, 2021.
- Firms operating in the UK are relying on the rules and guides issued by the Financial Conduct Authority (FCA) as the main body regulating financial services in the country.
While adverse media procedures are less detailed compared to other compliance measures — for instance, transaction monitoring or sanction checks — authorities stress the importance of news searches when preventing financial crimes and fulfilling legal obligations.
How to Check for Adverse Media
The purpose of the screening is to get a clear vision of a customer’s profile, their credibility and associated risks. To complete this tasks the following steps are required:
- Evaluate the need to run the screening, as the procedure is only necessary in particular instances. Therefore, before spending the time of your team on a new assignment, determine if there is anything that requires a higher level of attention to the client, such as transferring a large amount of money or taking an official position. If not, the check is optional.
- Create a list of relevant search queries, including company’s name, director’s name, their recent deals, etc.
- Think of the list of media outlets, which were likely covering stories on a particular company. For clients from english-speaking countries or large enterprises it may be enough to run a search in English. If you are engaging in a business relationship with a client from another country, you may need extra assistance to run searches in foreign languages and analyse such publications.
- Make sure of completeness of information and credibility of sources before including them into analysis.
- Analyse publications and media coverage to get an idea of possible risks in providing services to the client.
- Set up regular monitoring to receive notifications on high-risk companies and individuals.
LIGA UNITED can assist you in each of the mentioned tasks, so you can step up your advanced media search, free up the time of your team and get a clear picture of each client.
LIGA UNITED Makes Adverse Media Easy
LIGA UNITED is an end-to-end solution for monitoring and risk control, which offers advanced features for negative media search. The following tools can help companies to be sure of every client:
- Smart filters are helpful for precise searches, when there is a need to select publications from a certain media niche (i.e. culture, finance, socio-political outlets), to see all mentions from a particular source, or to see what persons are mentioned in line with the company of interest.
- Search hints help to enter correct queries, so if you made a typo in a person’s name our system will suggest corrections.
- Media links analyser shows publications where persons or companies were mentioned together to compare the coverage and find links between them. This tool is useful to determine competitors in the media field, speakers who comment on certain issues most frequently, and to determine which persons are associated with your clients the most and affect their reputation.
Functionality of LIGA UNITED comes in handy for various departments and business tasks, including compliance officers, HR and PR teams, and, of course, top managers who want to keep a hand on the pulse of their company’s reputation. Order a demo to see what features will work best for your team.
Adverse media searches are performed as a part of KYC/AML checks to ensure that the clients have no negative media background, which poses the risk for cooperation.
The volume of daily news makes it nearly impossible to run manual checks, therefore, companies use automatic tools to retrieve mentions regarding their clients.
LIGA UNITED covers all compliance needs for checking clients. You can get a full picture of the client using our smart filters, search hints, and media links. Furthermore, the platform allows checking against sanction lists and getting dossiers of companies of interest, so you can be sure of each customer.