Nowadays compliance teams often advocate for the implementation of adverse media screening tools. These tools use algorithms and artificial intelligence to scan social media, news sites, and other public sources for mentions of your customers and flag these mentions as positive, neutral, or negative depending on whether they are positive or negative.
These tools are marketed as a way to stay in front of potential issues before they become problems. But there are a few reasons why this is rarely a good idea:
1) You can’t control what comes up in the search results. A simple Google search for any company will turn up plenty of hits that are negative but totally unrelated to anything having to do with the company. This means that if you implement an adverse media screening tool and begin seeing negative results, it’s likely because someone else was complaining about something completely unrelated to your customers, the news is too old, or even about fictional characters.
2) It’s often too broad-reaching in its scope—and therefore misses important information—because it relies on algorithms rather than human expertise. The algorithm may be programmed using keywords or phrases that are relevant to your industry or line of work, but it won’t have the ability to distinguish between positive PR and negative PR when it comes across an article about your customer or counterparty.
3) As to the regulatory requirements, the Financial Action Task Force (FATF) has published a series of recommendations on how countries can improve their anti-money laundering and counterterrorist financing regimes. These recommendations are often used as a reference point when countries review and update their AML laws.
One of the FATF’s guidelines makes is that countries suggest financial institutions conduct adverse media screening (AMS).
Although this recommendation has been repeated many times by FATF, it does not state that AMS is required by law. Instead, FATF says that countries should consider implementing it as part of their AML regimes.
If you want to know more about wise adverse media screening vendor selection process, contact our experience compliance advisors!
