As adverse media screening (AMS) gets harder to do, setting your AMS system up right has never been more critical to your organization’s reputation, compliance, and workflow. It’s dammed if you do; dammed if you don’t.
Adverse media screening, also known as negative news screening, is an integral part of your KYC and AML regime. In its most basic form, AMS is the process by which a current or prospective customer is screened for negative news mentions and other unfavorable information. AMS allows your organization to flag a person or business as a potential risk and thus avoid future reputational and compliance damages.
Getting AMS right, however, comes with many challenges, including:
- AML compliance teams are often already bogged down by time consuming, manual processes. Manually searching news sources via search engines just adds to the complexity.
- The sheer volume and complexity of the news data that must be scanned and sorted is staggering.
- Dealing with news feeds versus public watchlists is exponentially more complex. It goes beyond filtering false positives and identifying the correct person or business. One has to resolve the news article for sentiment, context, and other aspects of relevancy to determine if it is truly adverse media.
- AML compliance reporting requirements are becoming more stringent among smaller financial institutions and MSBs. Credit unions in particular are currently facing many changes to their AML compliance requirements. This leads to either under-reporting or over-engineering, either of which can lead to costly mistakes.
Institutions need to develop AML compliance systems that can successfully and efficiently identify high-risk customers. In particular they should define:
- When to perform adverse media scans?
- What types of data to search for and from which sources?
- What type of systems and procedures to use in order to balance manual and automated interventions?
Adverse Media Screening: Finding the Right Balance
Luckily, AMS is not rocket science. However, developing an effective and efficient AMS does require a structured approach as well as the integration and implementation of some core technologies. It also requires striking a balance between taking a risk-based approach to AMS while maintaining high-level of customer service and flexibility to scale operations for future growth. Done right, and done with the right technologies, such as AI and NLP, AMS should not result in a slow down of your customer onboarding and ongoing monitoring.
That said, here are four best practices that your organization can use to get your AMS off to the right start:
1. Determine Your Risk Tolerance and Perform a Risk Assessment
Setting the parameters for what constitutes an acceptable level risk when deciding whether or not to work with a particular customer, is a critical first step. This process involves answering a number of questions, such as:
- Which high-risk groups of individuals or businesses is your institution comfortable servicing?
- Which offenses would bar a potential customer from being accepted? What offenses would not?
- How much weight do charges and allegations get versus an actual conviction by a court or an admission of guilt?
- Which types of adverse media could be considered lower-risk over time?
- What systems and processes will be in place to take action and perform Enhanced Due Diligence (EDD) when the results of adverse media screening return matches?
Every financial institution and MSB has its own unique exposure to potential financial crime based on the kinds of customers it serves, the locations it operates in, it’s product and service mix, and the channels it uses to service customers. Every financial institution and MSB also has its own unique risk tolerance.
Before you can even begin to design an effective AMS, it is crucial that you set clear risk categorization thresholds and outline the relevant actions and details required for each.
To help with you with that, try our FREE AML Risk Assessment Tool!
2. Decide When is the Right Time to Screen
Though most financial institutions and MSBs engage in customer screening during the onboarding process, many do not have a clear and consistent screening strategy, particularly when it comes to ongoing monitoring for adverse media. When standardized procedures and decisioning are lacking, both routine monitoring as well as monitoring triggered by an event, such as a news item, can result in discrepant responses.
Adding fuel to the fire are increases in regulatory expectations, expanding sanctions data bases and watchlists, and an increasing number of categories that must be screened against. For example, in recent years AML transaction monitoring has grown to include crimes dealing with human trafficking and smuggling, as well as new business customer types that fall in ‘High Risk’ category, such as cannabis-based businesses and a wide range of innovative fintechs, such as crypto-currency.
Some of the best practices to help ensure that your organization screens customers at the right time without increasing the rate of false positives includes:
- Decide which events and activities warrant further examination
- Include AMS in the standard onboarding procedures for all new customers and for any new accounts from current customers
- Establish automated AMS for all customers on a routine basis
- Screen current higher-risk customers based on your organization’s risk-based approach.
3. Use Credible and Current News Sources
These days, anyone with internet access can become a publisher of “news.” Although this helps to ensure that critical information becomes available to the public, at the same time it creates several challenges for your AML compliance system and procedures:
- First, how can you verify the credibility of an original adverse media source?
- How should you handle alternative news sources, such as social media?
- Which of the many tens of thousands of verifiable sources should you choose to monitor for a particular customer– especially since the sources themselves may change?
- How do you ensure that you are working with current news items?
- How far back in time to go for screening adverse media?
- Finally, how can you sift through all of this information in an efficient and effective way?
Given the dynamic nature of sanctions and screening data, you need a smart watchlist database that can actively weed out unnecessary information while focusing in on items of true value. This data can then be coupled with a dynamic, automated system to help you match, sort and analyze the results. You must get this step right before you even venture into the minefield of negative news screening.
That brings us to final best practice in adverse media screening…
4. Use Smart AMS Technologies
Automated AMS technology can help your organization address the deluge of information and alerts by focusing in on the most relevant matches. Sophisticated AMS tools also significantly reduce false positives and help you screen customers according to their risk categories.
Consider our Adverse Media Check ®. We harness the power of AI, NLP, and machine learning to continuously monitor thousands of quality relevant global news sources. Our sophisticated algorithms get to work identifying sentiment, context, and the prime actors (i.e. personas) in each article. This information is then structured and fed into a persona database of individuals, companies, and politically exposed persons (PEPs) to identify cross-links between news and government and public watchlists. Each Persona is also tagged with FATF supported categorization of risk of financial crime.
Adverse Media Check also feeds into the KYC2020 DecisionIQ decisioning engine to render Pass/Fail/Verify decisions on AMS so that you can speed up your customer onboarding with the help of AI-based decision systems.
