According to the United Nations Office on Drugs and Crime , money laundering accounts for between 2% and 5% of global GDP each year. With global GDP reaching $87 trillion in 2019 before declining to around $84.5 trillion in 2020 , it implies between $1.7 trillion and $4.4 trillion was possibly laundered in each of the previous two years.
Given such astonishing figures, it's no surprise that federal financial regulators place such a high value on anti-money laundering (AML) measures at financial institutions. With the AML struggle becoming more challenging by the year as criminals and terrorists adapt and acclimatize to preventive measures, adverse media screening has emerged as a powerful weapon in the money laundering battle.
What Is Adverse Media Screening?
Adverse media screening, also known as negative news monitoring, is the practice of examining various news and information sources for any sort of negative information or activity linked to your clients. It can disclose a variety of things that may indicate an increased risk of money laundering, including the following:
- Press stories or social media posts that call into question a customer's reputation, authenticity, or reliability
- Information highlighting the complexities of a customer's life or company, such as links to other high-risk or reputationally suspicious persons or firms.
- News of a customer's financial difficulties may drive them to desperation, making them vulnerable to corruption or fraud.
- Evidence of previous or current misconduct that may be replicated
- Allegations or indictments of illegal conduct by law enforcement, including but not limited to money laundering, terrorist financing, drug trafficking, cybercrime, and fraud
- Actual criminal convictions, particularly those involving financial crime
Local, national, and worldwide sources, including conventional media channels like newspapers, magazines, television, and radio, as well as modern online resources like websites, blogs, and social media, can be screened. Furthermore, financial organizations can search law enforcement, government, and commercial databases for adverse information about their consumers.
Why Is Adverse Media Screening Important?
Adverse media screening is a critical component of the effective AML strategy needed by authorities. A check might reveal your client's or business partner's reputation as well as the danger they pose.
The media proposes the quickest way to learn about criminal claims. Investigations are conducted by law enforcement and journalists to determine the illegal acts of people and organizations, and their conclusions are published in press releases or news articles. As a result, before starting a partnership with a new customer, you should do an adverse media check to see if they are involved in money laundering, terror funding, financial fraud, or other illegal activity.
Because most regulators need a risk-based approach to compliance, adverse media screening can help determine a client's risk score. If no results are found during a check, the client should be given a low-risk score. However, if a piece of bad news emerges, a customer should be marked as high-risk. In this case, an obliged organization should either undertake an enhanced due diligence procedure or terminate relations with the individual completely.
Adverse media screening is clearly beneficial to any company that wishes to know who they can trust. However, regulated companies, such as financial institutions, are required to execute these checks on a regular basis.
While adverse media screening is beneficial to any organization that wants to know who they can trust, it is mandatory in regulated sectors. Failure to accurately establish a client's risk factors may result in legal consequences. Financial institutions spend an average of $14.82 million annually on AML violations. While fines result in substantial financial losses, institutions also pay with a damaged reputation, which frequently results in the loss of customers.
Adverse Media Screening in Banking
As the regulatory and enforcement focus on money laundering and associated financial crimes grows, adverse media screening may be extremely valuable to banks. Adverse media screening that is effective reflects a bank's strong commitment to responsible compliance and can result in significant and immediate advantages to the overall customer due diligence (CDD) program.
Many companies are resorting to creative solutions to automate operations and decrease the manual and unproductive processes that continue to plague many AML control frameworks in US banks and financial institutions.
Last year, the FATF issued important research in this area titled 'Opportunities and Challenges of New Technologies for AML/CFT,' which argued for investment in new technology to increase the speed, quality, and efficiency of anti-money laundering and counter-terrorism financing procedures. According to the report, these technologies can help financial institutions and regulators identify risks more correctly and swiftly. New technologies, when deployed with a risk-based approach, can also increase financial inclusion by bringing more individuals into the regulated financial system and so enhancing the effectiveness of AML/CFT measures.
Until recently, adverse media screening was a costly and time-consuming procedure that relied mainly on manual reviews of vast amounts of articles received from unstructured media data sources or search engines like Google. As a result, banks have implemented adverse media screening in just a limited proportion of high-risk client circumstances. Many people still rely primarily on search engines. Unfortunately, this may easily lead to crucial information being overlooked.
As banks and financial organizations increase in size and complexity, consistency and scale become critical challenges, and a bank's approach to adverse media screening must become more strategic.
Fortunately, AI-powered adverse media tools are ready to assist. Ai-powered adverse media screening systems are intended to enable dynamic consumer risk scores. This enables a bank to carefully define the risk categories it wants to observe for a specific customer, only producing warnings when a risk profile changes dramatically.
As banks expand, they must guarantee that adverse media checks can scale with their client bases. They must, in particular, ensure that their alerts do not generate a large number of false positives that must be manually cleared, thereby delaying client onboarding.
Sanction Scanner's Adverse Media Screening Software
Our global Adverse Media data covers news on money laundering, terrorist funding, bribery, and drug trafficking. With the Sanctions Scanner, companies may implement Adverse Media control in Customer Onboarding processes in addition to PEP and sanctions, supporting AML compliance procedures. Our worldwide Adverse Media data helps uncover dangers in businesses' customer account opening processes.
With the customer's credentials, businesses may quickly undertake Adverse Media checks. At the same time, businesses can use our technology to automatically monitor worldwide comprehensive Sanctions, PEP, and Adverse Media data based on their risk levels. Additionally, businesses can use Sanctions Scanner to perform Adverse Media screening through API, online, or batch files. For more information, contact us or request a demo .
