It is four years since the Financial Conduct Authority carried out a wide scale review of controls major banks have in place to prevent money laundering and bribery and corruption. Following the review, the FCA recommended a series of measures that banks should take to combat money laundering, corruption and sanctions breaches.
The FCA found that although a small minority of financial institutions surveyed had put in place sufficient controls, there remain widespread weaknesses in most of anti-money laundering control systems and in some institutions' sanctions controls.
The FCA has now issued new guidance to banks on enhanced due diligence to prevent money laundering or corruption by clients, potential clients and account holders. One of the central planks of the new guidelines is the requirement for financial institutions to use media monitoring as an important tool to prevent fraud.
Where risk is missed
The FCA is keen that banks take note of adverse media or negative news to guide their approach to doing business. Although the risks from doing business with companies or clients with adverse media profiles are varied, the benefit of media monitoring is clear: spotting a potential problem involving fraud or corruption before the institution becomes associated with it or allows its reputation to suffer as a result.
While the FCA promotes the use of open source websites to gain a better understanding of the customer or beneficial owner, their reputation and their role in public life, it acknowledges that this may not be enough when it comes to enhanced due diligence and recommends using third party intelligence to build up a reliable picture.
The importance of media screening
Media screening gives banks and financial institutions better understanding of a person or company's risk profile. That data then guides decision making within the bank by completing the picture that internal due diligence may have only partially built up.
Thorough media reports may pick up, for example, reports about overseas tax complications or even a link between an individual and somebody flagged as a Politically Exposed Person (PEP) or individuals recently added to a sanctions list.
While screening traditionally took the form of using a press cuttings agency, modern monitoring encompasses the traditional press, broadcast channels, the web and social media. Present-day monitoring using sophisticated data analytics can even help drive strategy within a financial institution by flagging reputational and corruption issues before they become more widely known.
Knowing a client may not be enough
The FCA's new guidelines are not yet mandatory but it is clear the trend is moving towards greater and tighter scrutiny and regulation when it comes to compliance with anti-money laundering and anti-corruption measures.
Simply knowing an individual client may not be enough – it may be necessary to gain a wider picture of the client's partners, associates, suppliers and even individuals' spouses to fully comply with new enhanced due diligence requirements. By using advanced data analytics, media monitoring and screening as part of day-to-day compliance procedures, banks can get a better understanding of the risks that they face.
LexisNexis Business Information Solutions delivers a range of self-service and bespoke analysis and reporting options. These tailored services are able to search and track relevant news sources and uncover and deliver insight through advanced analytics. Information professionals can access reports through an advanced dashboard which brings together data from all relevant sources – web, print, social media, blogs and broadcast media – and identify critical trends with comprehensive analytics and visualisation tools.
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