7 best practices for adverse media screening

When conducting customer due diligence (CDD), financial institutions (FIs) must assess prospective customers against a variety of risk factors. One of these is adverse media, or negative news: information from media sources indicating that a customer may represent a money laundering or terrorist financing risk. 

It’s essential for firms to be able to identify and evaluate this kind of information to make informed decisions about whether to do business or continue doing business with a given customer. This helps them limit their exposure to money laundering or terrorist financing risks, and protect themselves from the consequences of regulatory non-compliance. The process that enables firms to do this is known as adverse media screening. 

However, screening for adverse media involves dealing with vast amounts of data, particularly in an increasingly diverse and multifaceted media environment: not only from traditional print and broadcast news sources such as newspapers, radio, and TV, but also from blogs, social media, and unstructured online forums. 

Balancing the pressures of business growth and regulatory compliance, firms need to be able to identify, interpret, and prioritize this data to act on it when necessary. As such, a firm’s screening solution should be tailored to its needs as an organization and built on an understanding of adverse media screening best practices.

Best practices for effective adverse media screening

1. Conduct a risk assessment 

Any adverse media screening firms conduct should be based on an initial risk assessment, identifying the areas where they expect to face risk. This should be based on the services or products firms offer – for example, services that allow customers to operate anonymously, such as private banking, are usually higher risk – as well as the types of customers firms expect to do business with. 

Higher-risk clients tend to include politically exposed persons (PEPs), those from jurisdictions with weaker anti-money laundering and counter-terrorist financing (AML/CTF) controls, and those whose occupations make them more likely targets for money laundering or terrorist financing, such as:

• High-value dealers.
• Money transfer agents.
• Casino employees.
• Public works contractors. 

Firms should prioritize positive adverse media alerts relating to any of these areas. 

2. Develop clear policies and procedures 

Once they have carried out a risk assessment, firms should have defined policies in place, setting out their compliance obligations and how they intend to meet them, as well as procedures detailing how to enact these policies on a practical level. Some important things to bear in mind when developing these are: 

• Local regulations: Adverse media screening is integral to AML/CFT program recommendations from bodies such as the Financial Action Task Force (FATF). Firms should check which regulations are in force in their jurisdiction and use this to guide their adverse media screening policies and reporting obligations when cases need to be escalated. 

• Audits: Because contemporary money laundering typologies are constantly evolving, firms cannot afford to stand still when it comes to their AML policies and should ensure that their negative news screening processes are reviewed regularly and by an independent team. 

• Training: Although compliance officers and teams take the lead in implementing effective AML/CFT policies, all teams across organizations should receive regular and thorough training on enacting these policies so that firms can rely on several lines of defense against financial crime. 
• Documentation: Firms should keep clear, easily accessible records of policies and procedures, all customer screening activity undertaken, and the reasons and evidence behind any actions taken. This is important not only for clarity in decision-making but also in the case of external audits. 

3. Use advanced adverse media screening technologies and solutions

Since effective adverse media screening involves collating and analyzing vast amounts of data, the traditional approach of relying on manual checks is inadequate for handling the task at scale. The overwhelming volume of information firms need to sift through makes the process excessively laborious and time-consuming.

Adopting automation to speed up the more repetitive, less skilled elements of the screening process is an important step for compliance teams since it can analyze data from media sources much faster and on a much greater scale than manual teams. 

However, compliance teams’ human expertise remains an essential tool, particularly when establishing risk profiles, determining parameters for adverse media searches, and investigating positive hits. The most effective adverse media screening strategies combine these two elements, bolstering human expertise with the efficiency of automation. 

4. Screen against credible and comprehensive data sources

Not all media sources are equally reliable. Firms should ensure that, as far as possible, they screen customers against credible and comprehensive sources so they can investigate the most pressing adverse media cases and save resources looking into less trustworthy positive results. Since not all adverse media findings are equal, assigning lower levels of risk to less credible or comprehensive results will help firms progress customer onboarding more quickly. 

5. Categorize adverse media results 

Similarly, a client’s risk profile can vary not only due to the existence of adverse media but also due to its content. No two cases should be treated as necessarily the same – the seriousness of an adverse media story is affected by factors like whether it relates to criminal or civil misconduct, whether the client is directly connected with a money laundering crime or predicate offense, and so on. 

For this reason, firms should interpret the significance of negative news stories to assess their impact on client risk levels, something made easier by establishing a categorization system. Examples of adverse media categories that should be treated more seriously include:

• Financial crime: Examples include money laundering, terrorist financing, fraud, corruption, and insider trading. 
• Drug trafficking: As a predicate offense in money laundering, this is on the more severe end of the adverse media scale, alongside similar activities such as weapons trafficking and human trafficking. 
• Cybercrime: Any offense involving a computer or networked device such as a phone or tablet should be flagged as a high-priority adverse media result. 
• Regulations: A history of regulatory non-compliance may result in criminal prosecution or indicate involvement in associated criminal activities.

6. Assess the recency of adverse media 

Alongside credibility and content, the timing of adverse media results plays a significant role in determining customer risk. Some results will be of greater concern to institutions than others; one adverse media finding from several years ago will naturally be less of a priority than several results from the past year, for example. With this in mind, customer risk levels can be adapted according to the recency of adverse media results and even reclassified over time in the absence of any new results. 

7. Conduct ongoing monitoring

Adverse media and negative news screening can only deliver historical information about a client’s risk profile. If that information is not updated, firms risk losing sight of their clients’ exposure to risk and being caught out by breaking news. While adverse media screening is a vital step of customer onboarding, firms must also capture subsequent changes in customer risk profiles. Adverse media screening best practice suggests firms should monitor their clients for negative news on an ongoing basis to maintain the accuracy of risk profiles.

Automated adverse media screening software

With the volume and variety of data involved, manual adverse media checks are no longer enough to satisfy compliance obligations while achieving business growth. By automating repetitive tasks and providing accurate results, an approach to adverse media screening based on machine learning frees compliance teams to focus on more critical and creative work, enhancing the organization’s ability to identify genuine risks effectively.

ComplyAdvantage’s adverse media screening software uses natural language processing for maximum precision in searches and is structured around four central capabilities:

• Structured screening: Our software screens against structured, continuously updated entity and individual profiles, not an infinite stream of articles. 
• Curated source lists: ComplyAdvantage uses specific source lists collated by financial crime experts and based on the reality of how criminals operate. 
• Contextual machine learning: Our solution filters out non-adverse media hits with machine learning trained on specific contexts of adverse media. 
• FATF taxonomy alignment: It leverages an AML/CFT taxonomy aligned with guidance from the FATF. 

ComplyAdvantage’s Mesh platform enables FIs to meet the challenges of reliability, recency, and relevance in adverse media – while reducing onboarding times by as much as 80 percent and allowing firms to welcome new customers at scale.