In this article, we talk to smartKYC, an enterprise solution for KYC due diligence automation. One important field is adverse media screening, and the ways that technology can assist in sifting through a mass of information.

The old saying that there’s no such thing as bad publicity doesn’t go down well with private banks and wealth managers.

Tracking media reports about people and institutions is essential in firms’ AML and KYC processes, where penalties for failings can run to billions of dollars. 

As ever, the devil is in the detail. 

“Banks understand that regulators and standard-setters recommend adverse media checks as part of the risk-based approach. However, there are several challenges including poor definition, languages, false positives, irrelevance, repetition,” Dermot Corrigan (pictured below), CEO at smartKYC, told this news service. “We work with our clients to maximise precision and minimise noise through intelligent automation of adverse media screening, not just on a one-off basis but for the entirety of a relationship.”

Dermot Corrigan

Corrigan’s firm is an advanced enterprise solution for know-your-client due diligence automation. 

Adverse media screening is defined as the process of checking customers and counterparties against global news and media sources to identify allegations of financial crime, fraud, corruption or other risk. 

Most understand that getting this task right is more than avoiding compliance problems – it is guarding their reputation. 

“They [banks] understand that someone’s problem could become theirs due to risk by association,” Corrigan continued. “And the negative commercial impact of that could be far more costly that any fine. That’s why we have several clients who are using our products to perform much more frequent adverse media rescreening since the technology can operate in the background and only alert the KYC analyst by exception.”

Corrigan said smartKYC has developed a product called smartEYE to go one step further, continuously screening global news sources so that clients can watch, with confidence, that proportion of their clientele who merit 24/7 risk vigilance, given the perceived degree of risk.

A busy area
Information service providers provide data – some of it from media sources – which is useful to bankers and wealth advisors screening for potential money laundering and related risks. For example, this news service has spoken to Dow Jones and Moody’s Analytics. Other firms operating in this area include Ripjar, S&P Global Market Intelligence, Experian and FactSet.

There can be frictions: Demands for accessible data which can be fed into these systems clashes with privacy concerns, including the extent to which beneficial ownership should sit on public registers. (See articles here and here.)

Without being able to rapidly screen potential clients, wealth managers can be forced into setting long onboarding times – creating a potential “abandonment” problem. This news service hears that in jurisdictions such as Singapore, which have tightened compliance regulations, long onboarding times are a headache. 

What is at stake
“Where adverse media is a critical element of the due diligence process, such as for private banks, given the nature of their clients, they have transitioned away from the manual process to tools like ours because they need to do this work at scale, internationally, and more frequently then banks serving other customer groups,” Corrigan said. “So, they need to trust that the technology can automate this and triage for review only those cases that require human assessment. The benefit is not only that they get to understand where the risk is, fast, but they also don’t have to waste valuable human resources looking for risk where none existed.”

Ripjar – an AI-native provider of smarter screening solutions – recently conducted a survey among 400 senior financial services decision-makers in the UK, US, France and Germany. The research showed that 93 per cent of financial services leaders rate adverse media screening as critical or very important in their risk frameworks, with 90 per cent intending to raise spending on this area in the next 12 months

The survey found that 77 per cent of respondents already conduct adverse media screening. Separately, 82 per cent carry out politically exposed person (PEP) screening and 79 per cent screen for sanctions. 

“Adverse media screening has rapidly become one of the highest-stakes disciplines in financial crime compliance. Ninety-three per cent of financial services leaders now rate it as critical or very important to their risk frameworks, and 90 per cent plan to increase investment over the next 12 months,” Matt Mills, Ripjar CEO, said in the report. 

High speed
One requirement for such media screening is the so-called “right to be forgotten” from the internet.

Earlier this year, the UK's Ministry of Justice ordered of the Courtsdesk archive to be deleted, removing millions of historical cases from public access but subsequently withdrew its demand following an intense backlash. Courtsdesk, which contains an extensive database of UK court records, has become a critical resource for journalists needing to search, verify and report on criminal cases. However, after pushback from journalists and lawmakers who cited open justice concerns, the government halted this move to explore other options.

Corrigan concluded on the importance of the adverse media screening topic, and where the boundaries of technology and human action lie.

“While banks want technology that can intelligently automate screening, they also want a system where users remain in control – permissions, approval workflows, collaborative tools and oversight, all of which must be recorded in a detailed audit trail of system events, user actions and even field changes. This ensures that if ever a supervisor or regulator wishes to understand how initial due diligence or ongoing monitoring was done on a client, they have the perfect breadcrumb trail,” he said.