Adverse media checks help to uncover poor public feelings towards an individual or organisation that might harm any business partner by association. Adverse media checks are an integral part of enhanced due diligence strategies.
Corporate compliance is a necessary and unavoidable part of the modern business process. The UK government is cracking down on the £88 billion laundered through the country each year. As part of this, companies in the regulated sector are required to adopt a risk-based approach and perform due diligence and anti-money laundering checks on their clients.
An anti-money laundering check (AML) runs an individual’s name through international databases to confirm their identity and check for any know links to crime, political exposure or sanctions. However, some providers will also perform an adverse media check.
In this article, we will look at what adverse media is and the benefits of including them in your business process.
Adverse Media Checks
Adverse media is unfavourable news or information reported across a range of media sources. These are traditional newspapers and news outlets, but in the modern age it also social media, press releases and blogs. Adverse media checks help uncover suspected links to criminal activity and money laundering.
What is adverse media?
Adverse media is quite simply unfavourable news or information reported across a range of media sources.
- Television news
- Online news outlets
- Social media
The news topics classed as adverse, in a business context, are:
- Suspected/confirmed money laundering activity
- Suspected/confirmed terrorism financing activity
- Suspected/confirmed terrorism inks
- Suspected/confirmed organised crime links
- Suspected/confirmed fraudulent activity
- Political links
- Poor reputation
Whilst it is true that individuals can be falsely accused of illicit activity by media outlets and social media, the purpose of adverse media checks is to make you aware of these accusations. It is also true that some individuals may be able to avoid prosecution but be known criminals or operate in a country where their illegal activity is allowed. By alerting a director to any of these accusations that might exist in the media, adverse media checks are allowing them to make an informed decision on if an individual is a suitable business partner.
In addition to whether an individual is a compliance risk, adverse media also tells you if they, or a business they are associated with, has a poor reputation and suffers from a lack of goodwill that might tarnish you and your business by association. This can include stories of poor practice, regulatory breaches or even a general dislike by the public.
Whilst some news coverage in any given country will contain many international stories, the majority of news will be domestic and appeal to the national interest. In this way, a huge amount of information not available elsewhere is held in each country’s journalistic archives. The benefit of adverse media checks is that they give you access to an international knowledge base.
What are adverse media checks?
Adverse media checks are part of the due diligence process. Whilst it is possible to perform a cursory adverse media check manually, this is inadvisable as the amount of articles and media sources an individual can check is limited and they will almost certainly miss some information.
Digital adverse media checks, such as the ones on Red Flag Alert, are advanced, AI-driven processes; where millions of media stories are checked for references to the subject of the search. Any that are found and classed as adverse are then flagged and a decision can be made as to whether to do business together.
The software uses keywords to identify any relevant media stories and is capable of building, and screening, a network of third parties related to any illicit activities the subject is involved in. These checks are performed in seconds and check media outlets from around the world.
Adverse media checks are seen as one of the most powerful tools to protect against serious organised crime, where individuals are frequently able to avoid prosecution but their involvement is common knowledge.
The ability to connect third parties to the subject of the search and check if they have any adverse media against them adds an extra layer of protection and gives you a better idea of a potential business partner’s network and its risk to your company’s reputation. This is also an effective way to identify the ultimate beneficial owners of shell companies.
When to perform an adverse media check
Adverse media checks usually form part of the enhanced due diligence process. However, companies in the regulated sector must adopt a risk-based approach to due diligence and AML processes. This involves looking at the inherent risks facing each individual company and adopting appropriate and proportional processes. Should a company frequently deal with clients unknown to them, from overseas or involved in sectors at risk of exploitation for money laundering it may be appropriate to perform adverse media checks as part of day to day AML process.
Enhanced due diligence is performed when a potential client or business partner is deemed to be a high risk of money laundering or illicit activity. The purpose of it is to provide an additional layer of defence against criminals hiding the source of funds by running more detailed checks.
These circumstances include:
- Individuals or companies from a high-risk country
- Individuals seeking undue secrecy or not freely advising the source of their funds
- Large transactions
- Individuals from outside the usual customer base
Outside of enhanced due diligence, adverse media checks are an effective way to protect the reputation of your company should you be partnering with another business. In these cases it is likely that you would know if there were any adverse media stories affecting the goodwill towards this business; but, by reviewing social media and blogs, adverse media is an incredibly effective tool for gauging public sentiment. Should a company hold a poor public opinion, partnering with them may tarnish your company’s reputation.
Adverse media monitoring
As well as including adverse media checks in the pre-onboarding due diligence process it is also possible to monitor an individual or organisation for adverse media stories. The Red Flag Alert adverse media monitoring function continuously scans the internet and reports if adverse media arises.
This is especially useful when dealing with foreign parties or interests as it gives you access to breaking news in most countries, that would not necessarily be reported in the UK. It also lets you know of social media chatter, which often precedes traditional new reporting, to give you forewarning of any adverse news story that might be impending.
Adverse media checks and Red Flag Alert
Adverse media checks and adverse media monitoring are available through Red Flag Alert’s complete compliance solution. It offers unbeatable media coverage through a fully digital platform that saves time and money by allowing you to combine adverse media with all your AML and KYC compliance checks; meaning that staff can set up and conduct all required checks with a click of a button.
The Red Flag Alert system offers:
- Unbeatable match rates
- Advanced due diligence
- A full suite of risk checks
- Real-time PEPs and sanctions checks
- Time and cost-saving automation
- Ongoing support for users