What is Adverse Media Screening?
Adverse media screening is a leading indicator of financial, reputational, and operational issues. More so than any other tool on the market, adverse media screening is capable of detecting possible regulatory scrutiny, violations, mentions of instability or fraud, signs of negative sentiment, and internal issues before they pose a risk to your firm.
While there is no universal definition of adverse media screening, it generally refers to searching media sources to find negative information and news about the entity or subject your firm is working with. In most cases, it’s used to find information related to a customer or partner’s potentially nefarious activities.
Lack of Global Coverage Creates an Economic Impact
In 2020, the China Banking Regulatory Commission began investigating Ant Group, an affiliate of Alibaba, citing “suspicions of monopolistic practices” as a part of a greater anti-trust campaign against Chinese technology companies.
The investigation was widely covered in local Chinese news outlets but was picked up much slower by Western financial news sources. This delay left investors relying on Western news outlets unaware of mounting regulatory pressures, highlighting the critical role of robust adverse media screening.
Unlike traditional background checks, adverse media screening delivers continuous insights from international and local news, allowing U.S. banks and investors to proactively identify emerging risks. In this case, adverse media screening would’ve alerted investors to the anti-trust actions impacting their investments in Chinese technology.
Another case is Wirecard, a German fintech company found guilty of falsely inflating financial accounts by up to $2 billion. While the German press had reported on potential accounting irregularities for years, international news sources downplayed accounts.
It wasn’t until Wirecard declared bankruptcy that U.S. investors realized the scale of the fraud. In total, Wirecard investors lost up to $24 billion. A comprehensive adverse media screening process would have identified the numerous German media reports of Wirecard’s accounting practices, prompting investors to reconsider their investment.
The Legal Need for Adverse Media Screening
Adverse media screening has emerged as a crucial tool for financial institutions to safeguard themselves against money laundering and other illicit activities. It helps firms understand the “nature and purpose” of a customer’s business – a key requirement of the CDD Rule.
Global regulation for know-your-customer (KYC), Continued Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD) requires adverse media screening as a part of compliance processes. Such regulations seek to combat terrorist financing and criminal activity covered by complex ownership and other means.
Internationally, the Financial Action Task Force (FATF) recommends a risk-based approach to customer relations. FATF guidelines specifically mention adverse media screening as part of an effective EDD program, particularly for politically exposed persons (PEPs) and other high-risk clients.
In the European Union, the Sixth Money Laundering Directive (6MLD) introduces stricter penalties for inadequate AML measures, including expanding criminal liability to executives and other “legal persons” don’t prevent money laundering activities.
In the U.S., FinCEN has strengthened its stance on CDD, asking firms to take “appropriate risk-based” measures on customer information and due diligence. Similar regulation suggests “continuously monitoring” customer information to gather the most accurate risk assessment possible.
Not All Adverse Media Screening is Created Equally
As more firms move toward digital solutions for adverse media screening, two types of technology emerge: database-only screening and real-time web crawling.
These two methods weren’t created equally. Web scraping, or database-only screening technology, scans pre-compiled lists of adverse media mentions. These tools are limited to the sources in a given database, and are likely to miss early, nuanced information.
Real-time web crawling, on the other hand, actively crawls millions of web pages across news media, government publications, social media, and blogs.
This method captures the most recent, accurate, and comprehensive news information possible. It also leverages greater source diversity, including local and niche publications, finding contextual information that might be missed by database searches.
Vcheck Monitoring Addresses Adverse Media Screening Concerns
Continuous monitoring and adverse media screening solutions offer an innovative method to conduct adverse media screening safety and responsibly.
Vcheck monitoring allows you to monitor individuals and entities and receive real-time alerts if new information is found on your subjects. Our platform leverages machine learning and natural language processing technology to find relevant media articles for each client’s specific use-case and needs.
Capable of crawling millions of global media sources in real-time, Vcheck monitoring provides financial institutions with the most up-to-date insights on their customers and associated risks. Duplicate results are consolidated to highlight the most reputable and reliable information possible.
To ensure we’re delivering the most accurate insights possible, our platform is integrated with top global databases that preserve source diversity and expand scope.
Vcheck monitoring offers insights in 14+ languages. Coverage includes:
- Open-source news
- PEP lists
- Sex offender registries
- Criminal Records
- Sanctions & Enforcement lists
The Importance of Adverse Media Screening
As regulatory bodies worldwide tighten their grip on financial crime, understanding and implementing robust adverse media screening practices has become more important than ever.
By embracing comprehensive adverse media screening protocols, financial institutions not only protect themselves but also contribute to a more secure and transparent global financial system.
Contact us to learn more about how Vcheck monitoring safeguards your firm and streamlines adverse media screening.