Unmasking the truth behind adverse media screening
By
Ladanna James
Head of Marketing and Partnerships
Dispelling common misconceptions
Given that so much of our lives are being lived online today, you would be forgiven for thinking that most everyone conducts some form of online negative news screening especially when evaluating a potential new business stakeholder.
Some businesses take a formal approach to integrating adverse media analysis into their risk management frameworks but many don’t. We believe adverse media screening is a cornerstone of due diligence, yet many businesses operate under several misconceptions that could potentially jeopardize their reputation and corporate integrity.
So, what is adverse media? Adverse media or negative news screening, is any form of behavioural misconduct information on an individual or business that can be found across multiple online sources. Adverse media analysis helps organizations to gain a better understanding of who they’re doing business with and the risks to which they might be exposed. Many financial regulatory authorities are now making adverse media screening a legal requirement of KYC onboarding.
Yet, misconceptions persist. Let's delve into some of these myths.
Myth #1: "Since most of my business relies on referrals, I don’t need to vet these clients."
Many entities mistakenly assume that because their business predominantly thrives on referrals, vetting clients is redundant. This fallacy rests on the presumption that most clients are low risk, overlooking the potential ramifications of a single high-risk client. The truth is, a robust Know Your Customer (KYC) or client acceptance program should encompass adverse media analysis. Even though the majority of clients may not pose threats, the impact of a single risky client on a business's reputation cannot be underestimated.
Myth #2: "Conventional due diligence is enough."
Traditional due diligence that focuses on structured data that typically resides in databases is essential, but it’s not comprehensive enough. Watchlists, sanctions list and Politically Exposed Persons (PEPs) lists are sacrosanct. KYC teams, especially in the financial services sector, must adhere to these types of list-based screening, because regulators have made them a legal requirement. While structured data provides you with the information you’re looking for; unstructured data (online articles, blogs, social media posts, etc.) can introduce you to information you didn’t even know was available to you, or valuable and significant to your original query.
Myth #3: "My team is more than capable of doing their own online searches."
The variations in online search methodologies used by researchers can prove very unreliable if put to the test. Moreover, other factors such as limited attention spans, subjective biases, and general fatigue can significantly impact the depth and accuracy of the results obtained. The adoption of AI-driven algorithms for adverse media analysis not only standardizes the process but also ensures consistent, auditable, and relevant results. This automation minimizes human error and fatigue, enhancing the efficacy of risk assessment processes.
Valital's multi award-winning approach to adverse media analysis harnesses cutting-edge AI algorithms to navigate the vast expanse of unstructured online data in real-time, offering a comprehensive and dynamic analysis that complements conventional due diligence methods.
Valital is able to scour the internet to identify relevant information and provide standardized, auditable results.
Conducting adverse media analysis can no longer be a strategic choice; it's a strategic imperative in fortifying your risk management framework against unforeseen threats and safeguarding your business's reputation and integrity.