In the world of regulatory compliance, adverse media screening is known as the monitoring of negative news coverage about a client which could be a brand, organization or an individual. You may ask, why is adverse media monitoring necessary for regulatory compliance? How come financial institutions are obligated to perform adverse media screening before registering a customer? Or how does Adverse media screening protect a financial business from reputational damage? In this article, we will discuss how employing adverse news screening services helps protect the integrity of the international financial system and why financial companies should invest in adverse news screening Services?
Why Financial Firms Are Obligated to Perform Adverse Media Screening?
Financial institutions are obligated to screen their prospective as well as existing customers against the credible watchlists, sanctions lists and adverse media sources. The reason is that financial firms are held responsible by the government organizations, law enforcement agencies and international regulatory bodies for allowing the criminals access to the legitimate financial systems and facilitating their crimes by moving around their illicit funds. Financial crimes such as the massive tax evasion by the filthy rich, money laundering by financial criminals, bank frauds, embezzlement of public funds by the people in power, terrorist financing, corporate frauds, securities frauds, widespread corruption, bribery and many more, all these financial crimes hurts the economies across the world, widens the already existing wealth inequality and harms the integrity of international financial system, regulatory bodies and law enforcement agencies.
How Adverse Media Screening Mitigate the Risks of Financial Crimes?
Financial crimes cause trillions of economic loss to the global economy every single year. These trillions of dollars could have been used in infrastructure development to create jobs for millions of people to uplift billions of humanity from the shackles of poverty. Moreover, these trillions of dollars lost in financial crimes every year, also facilitate other crimes like human trafficking, weapons smuggling, cartels war, and drug smuggling that causes the loss of millions of precious lives. Such massive and far-reaching implications of financial crimes forces the governments around the world to bring stringent regulatory guidelines for the financial firm to comply with in an effort to curb financial crimes.
Adverse media screening practice is an adjunct protocol of the AML regulatory compliance requirement that helps the compliance officers to conduct proper background checks regarding a prospective customer. Financial corporations must conduct background checks by performing adverse media checks on all their prospective customers.
Sources of Adverse Media Screening
There are two main types of data sources in terms of Adverse Media Screening. First one comprises conventional sources of news which also turn out to be structured forms of news sources and usually comes in the form of print media. Examples include newspapers, television, radio channels, pamphlets, magazines, and so forth. The other one is the unconventional news sources which are usually unstructured and lie in virtual spaces. Examples include social media platforms such as Facebook, X (formerly Twitter), Instagram, LinkedIn, and online discussion forums such as Quora, Reddit, Discord and many more.
News Outlets
Adverse media checks cover all the conventional news outlets in paper as well as in virtual spaces that provide coverage on financial crimes, corporate scandals, and criminal lawsuits. This helps in making sure that the prospective client has a clean financial background and is not involved in any financial misdeed that could harm the financial firm and risk regulatory fines.
Watchlists
Adverse media screening also involves screening the potential clients against the watchlists released by the international regulatory authorities like Financial Action Task Force (FATF), law enforcement agencies like Interpol & Europol and government organizations such as the U.S. department of State.
Databases of Regulatory Bodies
National and international regulatory bodies also release alerts and publications for the financial firms to stay vigilant and avoid clients involved in crimes.
Social Media Platforms
In today’s world, when most of the world’s businesses are also held in virtual spaces, social media platforms and posts offer an invaluable and insightful perspective on the actions and reputation of any business, brand or individual. Online adverse news screening helps detect clients that may have negative news coverage in virtual spaces.
Court Records
Official court documents released by the district, state, or federal courts which are publically available also offer much needed data on the financial history of any individual involved in the criminal activities.
Government Organizations Databases
Government organizations like the U.S Department of State maintain public records and databases that help in analyzing the ethical conduct of any prospective client and aids in adverse media checks. The biggest challenge in conducting the adverse media is accessing, analyzing, and screening the prospective clients against the sheer amount of adverse news sources. Hence, financial corporations are recommended to employ AI-driven adverse media tools to counter the risks of financial crimes.
