The insurance industry and the regulatory requirements around counterparty risk is always evolving, and so the obligations to minimise the risk and safeguard customers is becoming much more challenging for insurance companies. In the wake of COVID-19, financial crime continues to increase and whilst not all of these can be stopped – it is crucial they are recognised. Considering the increasing rate of criminals within the financial sector, it is increasingly difficult for organisations to identify and check the multitude of media sources and news articles in conjunction with onboarding and ongoing monitoring of the counterparties they trade with. Endless manual searches and trawling through Google invariably leaves room for human error and is incredibly time consuming. It is impossible to stay on top of every criminal that may be affiliated with the businesses you trade with, and yet it is crucial these are detected to ensure the ultimate safeguarding of customers and to mitigate reputational risk.
What is adverse media screening?
Adverse media is defined quite simply as any negative or unfavourable news found across various public sources, from traditional news including articles or blogs, to unstructured sources such as social media and internet forums.
Adverse media checks will automatically screen any business or affiliated individual against an array of sources, including Global Watchlists, to identify an organisations or individual’s involvement in activities, including (but not limited to):
- Financial crime (including money laundering, corruption, and fraud)
- Terrorist Associations
- Digital Fraud (such as identity theft)
- Illegal Trafficking (including Human slavery and narcotics)
- Property crime
Why is Adverse Media screening so important?
Maintaining compliance in line with Anti Money Laundering requirements is crucial for any insurance business. The European Union’s 4th Anti-Money Laundering Directive (4AMLD) suggested that businesses are required to screen for adverse media as part of their EDD process (Enhanced Due Diligence) for those living in high-risk regions and territories. Furthermore, 6AMLD went beyond this and stipulated that regulated businesses must take an even more comprehensive approach to adverse media screening – whilst the UK Government has opted out of complying directly with this particular Directive, numerous pieces of UK legislation are largely the same and in many cases, go further.
The difficulty in satisfying adverse media requirements is that there is no formal guidance from regulators as to what this looks like. Whilst they require firms to ensure relevant adverse media is identified, finding ‘what matters’ through manual means across unstructured data is beyond time consuming – it is virtually impossible. The sheer volume and complexity of content – often in multiple languages – means that even for the most experienced compliance analyst, it is an inefficient and arduous approach to accurately identify risks in a way that’s meaningful. In addition, the necessity of frequent and continuous searches means that it can cost a great deal of money, particularly for those firms that are continuously onboarding new partners.
Automating adverse media screening
Real-time and continuous surveillance across the various media sources is the only fool-proof way to ensure reputational risk and legal consequences are at bay. Asides from saving time and money spent on a manual screening process – automation provides insurance businesses with the tools required to conduct thorough and diligent investigations.
An automated tool will create immeasurable efficiencies and in turn allow compliance teams to apply themselves to more productive endeavours, empowering organisations to make sound business decisions. Adverse Media tools are a ‘must have’ and supports insurance companies in having a robust risk management strategy, adding another string to the bow in enhancing and streamlining due diligence processes.