We all know about the butterfly effect. The idea that some small event can, over time, have a big impact, even on people hundreds and thousands of miles away.
For many companies, bad news can be like that.
A small report about a customer can blow up into a catastrophic event, even months later. Thanks to that customer’s malfeasance, an organization could find itself exposed to risks such as fraudulent transactions, money laundering, and account takeover.
That’s why corporate risk and fraud professionals need to conduct adverse media screening regarding their customers. Of course, organizations can’t read every news source in every language across the world. But there are strategies to keep bad news from getting worse.
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What is adverse media screening?
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What is adverse media screening?
Adverse media screening, also known as negative news screening, is a risk assessment process that locates negative news, information, or publicity involving individuals or businesses that are current or potential customers. It requires searching through publicly available media, government, and data sources for reports or mentions of criminal activity, financial misconduct, regulatory violations, or other reputational issues. Adverse media screening is an essential part of both customer due diligence and risk management, helping businesses reveal potential risks such as financial crimes, false identities, regulatory violations, or reputational damage.
This screening is particularly crucial for financial institutions, which need to remain in compliance with federal know-your-customer (KYC) and anti-money-laundering (AML) regulations. But businesses in nearly every sector should also engage in adverse media screening during customer onboarding and subsequent ongoing monitoring to protect themselves from potentially costly risks.
Obvious examples of adverse media include reports about individuals or organizations involved in money laundering, terrorist financing, corruption, or other financial improprieties. Other types of adverse media may be less obvious, such as internal problems in a customer’s business that might be due not to illegal activity but rather, say, disagreements between partners or decreasing sales.
Screening challenges
Risk professionals probably have a good sense of the major challenges of adverse media screening. Very simply, there is a massive amount of media that they need to screen, much of which isn’t useful from a risk management perspective.
Data volume and quality
There are few professions that don’t have to manage what is sometimes still called “Big Data.” Organizations need to gather information from news reports, blogs, social media, government sanctions lists, and press releases while also filtering out irrelevant data, fake news, gossip, hot takes, and duplicate or contradictory reports.
Name matching and disambiguation
Much of the media screening process is taken up with differentiating between individuals and companies with similar names. This process requires correctly identifying customers across different naming conventions, languages, and transliterations.
Resource intensity
The traditional method to discovering whether a customer is involved in illicit activity or is experiencing other problems relies primarily on online search engines and database queries. This is a time-consuming, labor-intensive approach. And as customer bases become larger and more international, manual searches are increasingly inefficient, slowing down an organization’s operations. This can be especially problematic during the onboarding process when businesses are under competitive pressure to quickly activate customers.
False positives
One notable problem with manual screening is the false positive. False positives are search engine matches that turn out to provide incorrect or irrelevant information about a customer. According to some estimates, online searches can return up to 90% false positives. There also are false negatives. These are potentially relevant bits of information that are not caught by current search methods. Organizations need to distinguish between genuine risk indicators and irrelevant matches that waste investigative resources.
Coverage limitations
As we noted at the beginning, it’s just about impossible to screen across multiple languages, jurisdictions, and media sources. Few organizations have enough staff to ensure comprehensive screening via manual methods. At the same time, of course, they don’t want to miss a key piece of adverse news.
Best practices for screening
These are daunting challenges for any organization, regardless of size. But the following current best practices can make managing and mitigating the risks related to adverse media more efficient and successful.
Risk-based approach
A risk-based approach focuses more resources on higher-risk customers, rather than applying the same depth of scrutiny to everyone. For instance, those who are considered politically exposed persons require more intense monitoring, as do customers whose account activity patterns may suddenly have changed.
Automation and AI integration
Implementing machine learning and natural language processing tools can improve efficiency and accuracy. AI-powered automation can more accurately identify pertinent media mentions while sifting out irrelevant mentions, false positives, and other data noise. These tools also can identify who should be screened and how often.
Structured workflow
Adverse media screening requires organized data—and organized workflows. Businesses should establish rigorous procedures for alert review, escalation paths, and documentation to ensure consistent handling of screening results.
Multiple source types
Even though this can generate a great deal of noise that needs to be filtered out, organizations still need to access as many diverse information sources as possible to not miss any crucial reports. These sources can and should include traditional news, industry publications, regulatory websites, court records, sanctions lists, and vetted social media.
Regular monitoring and updates
KYC and other customer due diligence shouldn’t end after onboarding. Risk departments should conduct periodic rescreening of existing relationships, especially of higher-risk customers, to catch new developments that might change risk profiles.
These best practices are all incorporated in Thomson Reuters CLEAR Adverse Media. This digital solution is powered by CLEAR, an investigative platform to analyze vast datasets, including public records, social media, and proprietary databases, in order to identify negative customer mentions. CLEAR Adverse Media’s capabilities include:
- Comprehensive efficiency. Delivering relevant information across numerous databases in one search.
- Timely monitoring. Maintaining real-time connections to negative news sources.
- Compliance documentation. Identifying sources to meet documentation requirements.
- Automated vigilance. Automatically generating comprehensive adverse media and sanctions reports while providing new adverse media and sanctions alerts regarding high-risk customers.
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