Not long ago, the gap between the ratio of occurrences of financial and nonfinancial crimes was at par. However, financial institutions are now faced with greater risks stemming from non-financial factors such as cybercrimes, transparency, and negative news, outweighing traditional risks associated with transactions and credits.
Adverse media screening list screening facilitates real-time risk detection of such nonfinancial risk factors. Unlike typical tools which are resource-intensive, involve manual searches, and inefficient sources of information, this blog will talk about efficient adverse media screening KYC as mandated by regulatory frameworks.
Are you looking to avoid costly AML processes and complex regulatory requirements without compromising on risk appetite? Let’s get to know about it.
What is an Adverse Media Check or Negative News Screening?
Adverse media or negative news are interchangeably used to represent any negative news or media that helps understand the risks associated with existing or prospective customers.
While there is no universally agreed-upon approach towards adverse media screening, financial institutions must apply adverse media screening guidelines that align with their unique risk appetite and target audience to screen against.
The Joint Money Laundering Steering Group emphasizes conducting comprehensive adverse media screening as part of their enhanced due diligence measures, by which searches should be conducted against potential suspects.
Regulatory Frameworks on Improving Adverse Media Screening
As crimes are consistently evolving and measures are still lacking in their transparent sourced and efficient screening, regulatory frameworks are crucial.
These frameworks are defined as a set of guidelines that make sure to protect the integrity and reputation of the entity and associated user base.
Regulatory Frameworks require financial institutions to conduct comprehensive adverse media screening to protect their businesses from non-financial risk factors. A highlight of it reflects:
- Financial Action Task Force (FATF) instructs on conducting adverse media as part of an enhanced due diligence process.
- FINCEN highlights the importance of adverse media in order to understand liabilities against current or prospective customers.
- EU’s 4th Money Laundering Directive (4MLD) requires organizations to screen negative news to detect high-risk customers.
- EU’s 5th Money Laundering Directive (5MLD) emphasizes conducting automated adverse media screening, thus minimizing manual fatigue of screening for adverse media risks.
- EU’s 6th Money Laundering Directive (6MLD) has broadened the scope of adverse media screening, encompassing both cybercrime and environmental crimes to the domain of adverse media screening for more proactive detection of risks.
Wolfsberg Group Guide Reduces Gaps across Adverse Media Screening
While there has been a significant gap in regulatory guidance on adverse media screening, the Wolfsberg Group guide helps plug this gap with valuable insights related to:
Efficient and Reliable Data Sources
The importance of reliable data sources can be analyzed such that, the value of adverse media screening is directly related to the reliability and credibility of data sources used.
Now the question arises, how to depict which sources are to be considered? The coverage, accuracy, and completeness of a source make it reliable enough to use as a KYC-adverse media database.
In-depth Investigation of Negative News
What to do when adverse media has been identified? The next step to yield accuracy of AML screening is risk evaluation. Financial institutions are not recommended to file suspicious activity reports against every adverse media.
Analyzing sentiment associated with adverse media, its relevancy, and recency are crucial aspects to yield accurate results.
Risk-based Approach for Screening
While there are a number of ways that help minimize alert fatigue and direct resources toward alerts that are important, using a risk-based approach is the most efficient out of all. This includes embedding your system with pre-configured rules that automatically reduce alert fatigue by prioritizing specific alerts against pre-defined criteria.
Key-Words Based Search
Keywords or search phrases are the search strings that decide the output of the searches. Instead of receiving millions of results for a query, keywords help find precise matches. Financial institutions must decide on the search phrases within their in-house policies, to match their unique risk threshold and resources allocated towards adverse media screening.
To Sum it Up:
Financial institutions can suffer from unreliable screening if their records differ from the ones published in the media. The use of a risk-based approach, in-depth investigation, and reliable data sources enable unmatched adverse media screening outcomes.
Compliance risks are consistently evolving. Adverse media screening for non-financial risks can be best determined by screening traditional and modern media sources. Having a significant understanding of the regulatory framework and the percentage of importance they direct toward enabling adverse media screening is commendable.