In an era when client risk profiles can change in a matter of hours, institutions must be able to react quickly to breaking news to maintain compliance and prevent crimes. However, to clarify the degree of risk clients might pose, screening processes should also take into account categories or types of adverse media – and so must know what kind of stories to be vigilant for.
i) Financial Crime
Financial crime covers a wide range of activities, including money laundering and the financing of terrorism. It may also include fraud, bribery, or insider trading. Financial crime is a broad and complex criminal field that may be covered in both traditional and emerging media.
Violence involving clients directly, or carried out on their behalf, may generate significant adverse media, especially when part of a criminal enterprise. Violent crimes may be associated with political and workforce disputes, or wider patterns of human rights abuse.
The financing of terrorism, any terror-related activities are liable to generate significant adverse media across a range of media outlets. Terror-related adverse media may range from the distribution of terrorist literature and encouragement to radicalization, to the direct perpetration of terrorist acts
Fraud can be perpetrated in numerous ways and include fraudulent letters, telephone calls, emails, and websites. Fraud can be both a civil and criminal offense and, while the majority of cases involve improper financial gain, it may also involve property or immigration.
Narcotics crimes involve not only the use or sale of drugs but drug production and trafficking. Narcotics offenses and associated news stories are often related to financial crimes, including money laundering and terrorism financing.
Any criminal activity involving a computer or networked device like a phone or tablet may be considered cybercrime and reported as such. Cybercrime is an umbrella-term describing activities used to facilitate other offenses like money laundering, fraud, and terrorism.
Regulatory misconduct or non-compliance may constitute a crime in itself, or be an indication that clients are involved in other types of criminal activity. Adverse media stories on regulatory offenses frequently cross-over with financial crime.
Adverse media stories on property may involve activities such as burglary, theft, larceny, and arson, and constitute both civil or criminal misconduct. Property offenses may vary greatly in scope and be reported in a wide variety of news media formats.
Trafficking involves the transport of humans for the purposes of forced labor or sexual exploitation. A serious criminal offense, trafficking is often related to other offenses, including terrorism and various financial crimes.
x) Sexual Crimes
Sexual crime includes a wide range of activity, from violence, abuse, and rape, to the transmission or possession of illegal imagery. Sexual crimes are often in proximity to other offenses, including money laundering and cybercrime.
Adverse media categorization is a valuable KYC tool, especially since the FATF recommendations state that financial institutions must “understand their client’s reputation”, including previous criminal liabilities like involvement in money laundering investigations. Compliance with that direction requires adverse media screening – which traditionally involves time-consuming manual checks of vast, unsorted amounts of news reports, blog articles, and social media.
It’s important to make sure that any adverse media monitoring tool used is capable of identifying media by specific categories. This cuts down on noise and keeps alerts focused on what’s relevant by avoiding false positives. Depending on the risk-based approach businesses are taking it may also be prudent to receive different alerts based on different categories to make it easier for compliance officers to discover what’s relevant.
Categorizing adverse media allows firms to prioritize that workload, and gauge the level of risk associated with each client more efficiently. Negative news categorization may also better facilitate automated screening, in which searches can be further tailored to client profiles and regulatory environments. Automation allows firms to identify and assess adverse media, reduce false positives, and maintain the level of compliance performance that regulators expect.