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Mar 4, 2024

How to Conduct Adverse Media Screening for KYB

Teddy Butz
Marketing

In brief: 

  • Adverse media screening is a key complementary and pre-emptive KYB process that involves checking if a business (or associated person) is implicated in media coverage of illegal or unethical activity.
  • Adverse media screening typically includes collecting customer information, checking media sources, assessing risk, taking action, and documenting a report.
  • Some challenges with screening are that adverse media is not (yet) well-classified, and that certain information can be false or mean different things in different contexts.
  • Best practices include sticking with credible sources, screening people related to businesses for risks, categorizing risk types, checking how long ago the media was updated, and conducting ongoing monitoring.

Verifying a business’s identity and suitability for a B2B relationship requires validating and evaluating many pieces of information. By-and-large, these are details regarding the proper registration of a business and its associated people with government authorities. However, a class of information that’s growing in importance for KYB is adverse media: public information that portrays an entity in a negative light.

Adverse media screening is becoming a critical risk assessment tool in B2B relationships to find risks in unexpected places, or predict potential future risks. As useful as this can be, it isn’t a well-defined process yet in terms of regulatory standards.

This ultimate guide provides a framework that includes an adverse media definition, what can count as sources, the general steps, some obstacles to keep in mind, and best practices to do it effectively.

First, we’ll explore what adverse media screening is in a little more detail.

What is adverse media screening?

Adverse media screening is a KYC and KYB due diligence process. It involves searching for an entity’s name — either a person or a business (and/or its associated people) — in public information sources, looking for unfavorable coverage that may present risk to your company in a B2B relationship.

Why adverse media screening is important

Adverse media checks are important when forming or reviewing business relationships for at least two reasons. First of all, they provide a sort of “safety net” for the rest of your CDD checks. They can pick up risk indicators in places you may have missed, or perhaps didn’t intuitively think to look in.

Secondly, some media sources can alert you to risks with a business (or its associated people) before the details are officially documented. This can help you avoid reputational risk (even temporarily, if the negative coverage turns out to be false) or even legal risk (if the claims turn out to be substantiated).

Types of adverse media to screen

So what is adverse media? Unfortunately, “media” itself is a very broad term that can refer to many different types of information sources. Here are some common adverse media examples.

  • News outlets: This includes physical and digital newspapers; TV and online news videos; and audio news shows. Investigative journalism can uncover evidence of illegal or unethical behavior by a business (or someone associated with it).
  • Social networks & forums: Users of social networks and forums often provide feedback and opinions regarding businesses and their customer experiences. A buildup of grievances, criticisms, and unfavorable reviews can create reputation problems for a business. This could cause risks for you, if you’re affiliated with that business.
  • Blogs: Similar to with social networks, a business could post long-form content on blogs that readers respond negatively to (if they’re able), reducing the business’s credibility. Other blog writers could also post reviews, commentaries, and even exposés on businesses that could cause reputational risks — and even other types of risks if the information turns out to be valid.
  • Video sharing websites: Users may post things like reviews, commentaries, and even raw footage on video sharing websites that could damage a business’s image if they portray the business in a negative light. Additionally, if the business posts content itself, its reputation could suffer if users consistently give the content negative feedback or comments.
  • Regulatory databases: Public sanctions lists and watchlists from regulatory agencies, such as the Financial Action Task Force (FATF), can also count as adverse media. They can indicate a business or associated person is involved in unethical or even criminal behavior, or at least with a country that’s at high risk for this sort of activity. Or they could indicate activities from the business that aren’t necessarily illegal, but can still signal risks (such as bankruptcy filings, court judgments, and liens).

As you can imagine, with so many different types of media to monitor, it can be extremely time-consuming and tedious to screen all adverse media. Fortunately, there are solutions that can make it easier (which we’ll get to shortly!).

How to perform adverse media screening

Now that you have an idea of where to search for negative coverage on a business (or associated person), it’s time to learn how to search. An adverse media check typically involves the following four steps.

Step 1: Collect and verify customer information

A fundamental step in KYB is collecting information about a business customer (and its ultimate beneficial owners, or UBOs) and checking that it’s valid across official sources. This helps to ensure you’re dealing with legitimate businesses and people. Also, the more information you’re able to collect and verify about a business (and its associated individuals), the more accurately you can determine if media coverage truly refers to a particular entity in the event of name discrepancies or similarities.

Step 2: Conduct the adverse media search

There are several ways to look for media coverage on a business or its associated people. A common method is keyword-based searches, perhaps also filtering for specific timelines and risk categories. Another option is to use AI-powered natural language processing to help better understand the context of a piece of media and more accurately determine whether or not the media truly represents adverse coverage of the entity being screened.

Step 3: If adverse coverage is found, assess the risk it presents

If screening generates an alert, have a risk team member (or group) analyze the triggering information to see how much of a threat it constitutes. Questions to ask include:

  • What is the information’s source, and how credible is it?
  • What is the type of adverse behavior being described by the information?
  • How is the screened entity related to the adverse behavior? Are they its perpetrator, or are they involved in some other way (or at all)?
  • How deeply involved is the entity? Are they being suspected or investigated, or have they already been charged or convicted?
  • How long ago was the information last updated? Is the threat still relevant?
  • What kinds and degrees of risks would your own company face if linked to this adverse behavior?

Step 4: Take appropriate action and report on the screening

Based on how you evaluate the risks presented by any alerts, you may decide to take a range of actions on each one. You may decide to do enhanced due diligence on a business, report an existing customer for suspicious activity, or outright block or end a business relationship.

In any event, it’s important to keep a record of the screening, the alerts it generates, and the actions you take on them. Not only is this essential for auditing purposes, but it also allows for analyzing how a business’ risks related to negative media coverage change over time (as part of a broader risk profile assessment).

The challenges of adverse media screening

Screening for businesses and other entities for negative media coverage has its share of difficulties. Here are some of the most commonly-cited ones.

  • Unclear regulations: In many places, adverse media screening for AML has only recently become a regulatory necessity. So requirements surrounding things such as which (and how many) sources need to be screened and how to measure risk often aren’t well-developed yet.
  • Potentially huge pool of information sources: Since there are many possible types of adverse media, one of the biggest issues with screening is the sheer number of sources that could (or must) be checked. Even among the types we listed above, there could be hundreds or even thousands of information sources to screen against for adverse coverage.
  • Credibility of information: Not all adverse media attention is entirely factual. For example, in a developing news story, information can be added or corrected, which can change how an entity is portrayed. Or a story could be a piece of satire intended to make a point, but not meant to be taken as fact. Or a story could be deliberate misinformation designed to manipulate public opinion for or against an entity or idea.
  • Barriers to information access: Sometimes, supposedly “public” information sources still have several roadblocks to accessing them. Viewing information may require an account sign-up and log-in; a paid subscription, knowledge of a particular language, or for the user to be accessing the source from a specific geographic location (i.e. IP address filtering).
  • Synonyms and homonyms: An adverse media search based on keywords can miss true positives that use different words, even though the overall sentiment is similar. This often occurs if a source is in a different language than your keywords. Conversely, the search could return many false positives if the keywords are found, but are used in an unrelated context.
  • Name variations: Likewise, a business or person may appear to be receiving unfavorable media attention, but could just have a similar name to the entity being covered. Or a screening could miss their name in true adverse coverage because they are referred to by a nickname or alias.
  • Wrong context: Another possibility is that an entity’s name is found in adverse media news, but they are not the person or business being covered unfavorably. Instead, they could be a victim, a witness, a journalist reporting on the situation, or an authority representative commenting on the situation.

So how do you work around these difficulties while determining if there's unfavorable information about one of your business customers (or a related individual)? The following section discusses some adverse media screening guidelines that can help.

Adverse media screening best practices

Since adverse media screening requirements aren’t well-defined in many places yet, it’s more-or-less up to you to take a risk-based approach to the process. Here are some adverse media screening best practices that will help you do just that.

Establish which sources are credible and relevant 

Remember that some sources will usually be more reliable than others. Content published by accredited news organizations or government agencies is typically more trustworthy than what someone writes on their personal blog or says in a homemade movie. However, you may decide to screen against slightly less credible sources if your risk appetite is low.

Likewise, you need to decide what areas of subject matter will count as sources. General news coverage and political announcements will likely always need to be screened against. However, you may also choose to screen against industry-specific publications or community sentiment, especially if you have a low risk appetite.

Categorize and prioritize different types of risk

In addition to deciding which sources are relevant to you, you should also consider which risks are relevant. For instance, do allegations or investigations of wrongdoing threaten enough reputational (and other) risks that you would review or break off your relationship with a business? Or does an entity need to be arrested, charged, or convicted before the risk is significant enough?

You should ask similar questions regarding the types of alleged offenses. Serious financial crimes, such as corruption or money laundering, will always be highly relevant risks. However, what if a business does something potentially unethical, but not necessarily illegal (including high-risk activity inherent to what the business does)? What if a person associated with a business is accused of disorderly conduct that isn’t really related to the business’s operations? Again, your risk appetite should dictate whether the risk is relevant enough that you would avoid or reconsider a business relationship.

Consider the timeliness of alerts

Another factor in assessing the relevance of adverse media coverage is when the coverage took place. Granted, certain serious offenses may not see the relevance of their risk diminish over time. But other risks may become less relevant if the situation is satisfactorily resolved and enough time passes with no new developments. It depends, once again, on your risk appetite.

Don’t forget about UBOs, PEPs, and RCAs

Even if a business itself isn’t found to have negative media coverage, it can still pose a risk through the people associated with it. Knowing and verifying the identities of a company’s UBOs is a KYB requirement, so part of that should be checking if those people have received unfavorable media coverage.

In addition, some UBOs — or sometimes other people affiliated with a business — may be politically exposed persons (PEPs) or their relatives & close associates (RCAs). Because of their influential public positions, these people pose higher-than-normal risks related to involvement in crime, and are also more likely to receive media attention. So it’s important to keep a close eye on when they are covered by the media, and whether the coverage is negative or not.

Use a mix of automated and manual screening

An automated screening tool can process more data in a shorter amount of time than a human can do manually. Depending on the specific software, it can also account for some of the pitfalls that screening for negative news typically faces. So it will usually suffice for the bulk of your screening.

No tool is completely foolproof, though. Especially if set up improperly, it can generate a large volume of false positives by returning unrelated information. It can even miss relevant information that’s presented with words or names that weren’t being searched for. So it’s important to still have risk team members who can analyze alerts to determine if the found information is relevant and what level of risk it presents (if any).

Conduct ongoing monitoring and case documentation

News is changing and updating faster than ever before, so it’s vital to check for negative media coverage on each of your business customers (and their associated people) on a routine basis. Again, though, it isn’t practical to be screening all clients 24/7 across all of your chosen media sources.

We recommend doing a thorough screening at onboarding, and then setting risk-based schedules for each client to do more in-depth checks. If your regular screening generates an alert that you judge to represent a credible potential risk, though, don’t hesitate to look into it even if it doesn’t fit your usual screening cadence.

It’s also important to thoroughly document your findings, analysis, and actions taken each time you run a thorough adverse media search, as well as when you resolve an alert. This serves two purposes. First, it lets you track a particular business’ risk profile (at least with regard to media coverage) over time. Second, it provides evidence for auditing purposes to show you’re fulfilling this required KYB function.

Incorporate adverse media screening into your business verification with Middesk

Middesk provides several standard business verification checks, including basic registration documentation, formation documents, tax IDs, web presence, and US sanctions screening. Our Adverse Media product expands this coverage to trustworthy media sources, providing name match scoring, risk categorization, risk level estimation, and more.

To learn more about Middesk, contact our sales team.

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