What is Adverse Media?
Adverse media can be understood as undesirable or negative information regarding an individual/legal entity that is discovered across a variety of sources.
An example of adverse media could be news articles reporting on a large corporation’s involvement in a corruption scandal.
An adverse media check is a “scan” used to detect such undesirable or negative information. If done correctly, an adverse media check can reveal a party’s involvement or complicity in serious events such as corporate fraud, political corruption and organized crime.
Adverse media checks are often conducted in conjunction with sanctions checks and will therefore form part of a company’s risk mitigation strategy and AML/CFT regulatory compliance framework.
Why Adverse Media Checks are Important
Failing to scan for adverse media before doing business with a client is often regarded as bad risk management and can have serious consequences.
If an adverse media check is not conducted and negative information on a client is only discovered once a business relationship has begun, it may have serious consequences for the unknowing business.
At worst, failure to conduct an adverse media check can get a business associated with or involved in economic crimes such as money laundering, corruption, racketeering, or political scandals. In such instances, the unknowing business not only risks exposing itself to serious public scandals that can destroy its reputation but could even implicate the business in criminal activities.
If an adverse media check reveals adverse media on a client, it is up to the business to decide how it proceeds depending on its risk management strategy.
Examples of Adverse Media
Adverse media can come in different forms and from different sources.
- Traditional News Media: articles found in traditional media sources such as reputable media agencies, broadcasters and newspapers, e.g., a reputable investigative news report on businesses implicated in child labour practices.
- International Databases: information published by legal institutions and global organizations, e.g., a company that features in public court records of a corruption lawsuit.
- Online Articles, Publications and Blogs: content published by websites that comment on pertinent issues such as corruption, fraud and money laundering, e.g., a company that features on a watchlist curated by a multinational anti-corruption NGO.
Adverse Media Checks as Part of the Know Your Customer (KYC) Process
Know Your Customer (KYC) is a term that refers to procedures and mechanisms that are used to verify the identity of individuals/customers before conducting business with them.
When conducting KYC checks, a financial institution will typically be verifying:
- That an individual exists
- Whether that individual is exactly who they claim to be
- Whether that individual is eligible to receive the product or service in question
- Whether that individual poses a threat of money laundering or other such crime
Although not always conducted as part of the KYC process, adverse media checks play a critical role in helping a business to gather additional information about a client to assess and mitigate risk.
Online Adverse Media Checks
Today, all KYC and Enhanced Due Diligence (EDD) services are available online. Online tools, such as adverse media checks, enable highly efficient, accurate and cost-effective due diligence solutions that can be completely automated and easily integrated into a digital customer onboarding process.
For clients that need to conduct a significant number of adverse media checks as part of their customer onboarding process, advanced APIs enable the automation and seamless integration of such checks into a world-class customer onboarding process. For businesses that process lower volumes of due diligence requests related to identity verification and data validation
ThisIsMe offers a comprehensive range of due diligence solutions for adverse media and sanctions checks. For businesses that need to process a significant number of due diligence requests, our advanced API enables the seamless automation of the process and creates value by taking the pressure off human resources. For businesses that process a lower number of requests, our online Partners platform provides cost-effective access to our suite of world-class solutions on either a subscription or pay-as-you-go basis.
To find out how we can help your business seamlessly meet its due diligence requirements, contact our team here.
Adverse Media in a Risk-Based Approach (RBA)
South Africa employs a Risk-Based Approach (RBA) for its AML/CFT legislation. This means that any business, institution or organization designated as an Accountable Institution (AI) by the Financial Intelligence Centre Amendment Act (FICA) has to create its own AML/CFT protocols and risk management strategy to ensure its regulatory compliance. Consequently, the exact systems and protocols employed by an AI will vary depending on its specific risk management strategy.
Adverse media checks will often form part of an AI’s risk management strategy for higher-risk clients, such as Politically Exposed Persons (PEPs). When a client is identified as a PEP, an AI will typically run an adverse media check to further assess risk and the potential need for greater risk mitigation protocols.
Adverse Media Checks for Ongoing Monitoring
A comprehensive risk management strategy will include a process of ongoing monitoring that repeatedly checks for adverse media on clients that represent a high level of risk for a business or institution. Ongoing monitoring is important for adverse media checks, politically exposed persons and sanctions alike, with ongoing monitoring for PEPs and sanctions sometimes being a legal regulatory requirement.
Difference Between Adverse Media, Politically Exposed Persons and Sanctions Checks
There are numerous ways that a customer/client can pose a threat to a business. Such threats are varied and range from reputational risks all the way to clients with whom a business relationship could pose an existential threat to the business partner.
As discussed, adverse media is primarily a reputational threat and will form part of a risk management strategy aimed to mitigate the risk that a business will become embroiled in a public or legal scandal, as well as ensuring that the business does not find itself complicit in a financial crime due to close associations with a client that is implicated in one or more financial crimes.
On the other hand, a Politically Exposed Person (PEP) is someone who currently holds or has held political power and therefore represents a heightened risk of financial crimes such as money laundering. Consequently, various businesses and financial institutions are required to verify whether an individual is a PEP before conducting business with them. If an individual is identified as a PEP, that business/financial institution must conduct enhanced due diligence procedures to mitigate the risk they pose. The verification of an individual’s PEP status is legally required in South Africa which forms a crucial part of the country’s AML/CFT legislation.
Finally, sanctions represent one of the most serious threats to a business and can lead to severe financial penalties, prison time and the risk of being placed under sanction oneself. Like with PEP checks, sanctions screening is a legal requirement for many financial institutions in South Africa. It is therefore imperative that a business conducts the appropriate sanctions screening to ensure that it does not breach sanctions law and expose itself to existential risk.
To find out how ThisIsMe can help your business scan for adverse media, politically exposed persons and sanctions, contact our team here.
Sanctions Scanning and Adverse Media Checks South Africa
As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. We offer a wide range of FICA-compliant KYC services that encompass politically exposed person checks, account verification services, and company sanction and credit checks. To experience our full suite of due diligence solutions and see how we can help your business meet its AML/CFT regulatory obligations, book a demonstration by contacting our team here.
