What is Adverse Media Search and why is it used in financial services organisations?

Adverse Media Search is a process that involves searching publicly available sources of information to identify negative or adverse news about individuals or companies.

This type of search is commonly used by financial services organisations, such as banks and insurance companies, as part of their risk management and compliance programs.

What are the benefits of Adverse Media Search for financial services organisations?

There are several benefits of Adverse Media Search for financial services organisations. Firstly, it can help identify potential money laundering or terrorist financing risks by highlighting individuals or companies that have been involved in criminal activities or are subject to sanctions. This can help the organisation avoid the legal and reputational risks associated with doing business with these entities.

Secondly, Adverse Media Search can help financial services organisations identify potential fraud risks by flagging individuals or companies that have been involved in fraudulent activities in the past. This can help the organization avoid financial losses and reputational damage.

Thirdly, Adverse Media Search can help financial services organisations ensure compliance with regulatory requirements. Many regulators require financial services organisations to conduct regular checks for adverse news related to their customers or business partners. Adverse Media Search can help these organisations meet these requirements and avoid potential fines and penalties.

What are the sources of information used in Adverse Media Search?

Adverse Media Search typically involves searching through a wide range of public sources of information to identify negative or adverse news about individuals or companies. These sources may include online news portals or databases, regulatory and enforcement agency databases, court records, social media, public records databases, and commercial databases that maintain lists of individuals or entities considered high risk or associated with criminal or suspicious activities.

Is there evidence to support the effectiveness of Adverse Media Search?

There is some evidence to suggest that Adverse Media Search can increase the effectiveness of identifying risk persons. A study by the Association of Certified Anti-Money Laundering Specialists (ACAMS) found that nearly half of all organisations surveyed use Adverse Media Search as part of their due diligence processes, and that 37% of these organisations have identified adverse information that would not have been detected through other due diligence methods.

Another study by the World Economic Forum (WEF) found that integrating Adverse Media Search into anti-money laundering (AML) and counter-terrorism financing (CTF) programs can help identify previously unknown risks, enhance risk assessments, and improve overall effectiveness.

Additionally, a case study published by the US Department of Treasury reported that Adverse Media Search helped a financial institution identify a potential customer who was the subject of an active law enforcement investigation. The institution subsequently declined to do business with the individual, which helped prevent the institution from being implicated in the illegal activities.

However, it should be noted that no single due diligence method can guarantee complete risk identification or prevention of illicit activities. Adverse Media Search should be used in conjunction with other risk management and compliance measures to ensure comprehensive risk management.