Donor due diligence:

Examples of when adverse media screening was crucial

A recent study from the University of Notre Dame revealed that some companies strategically release unrelated press releases on the same day they submit negative reports to the US Securities and Exchange Commission (SEC). Why? To divert investors’ and partners’ attention away from unfavourable developments. 

The study analysed nearly 50,000 non-earnings-related filings and found that 40% of the reports conveyed negative news, with 33% being accompanied by a same-day press release. While this might fool some, adverse media screening could potentially uncover both.

What is adverse media screening?

Adverse media screening (AMS), also known as negative news screening, is the process of checking for damaging information about a person or a company in online sources like websites, news articles, blogs, and social media. 

It helps in making informed decisions, especially when dealing with high-risk entities, politically exposed persons (PEPs), or subjects of interest in financial crime investigations.

AMS uncovers potential links to activities related to money laundering, terrorist financing, organised crime, fraud, and more. When risks are surfaced, it signals the need for a more in-depth investigation to determine whether suspicious activity is indeed occurring.

In today’s complex regulatory landscape, the importance of AMS cannot be overstated. Whether you’re a financial institution, a law firm, or a non-profit, you need to understand the negative news associated with your clients, partners, or donors. The consequences of missing this insight can be severe, ranging from reputational damage to regulatory fines. In fact, global executives attribute 63% of their company’s market value to its reputation, according to media communications specialists Weber Shandwick.

Risks are constantly evolving

The rise in global sanctions against Russian entities in the last two years has gained significant attention. But sanctions risks extend beyond Russian-linked entities.

In April, the Office of Foreign Assets Control (OFAC) announced its largest-ever settlement with a multinational UK-based tobacco company. The company was fined $508 million for alleged violations of US sanctions against North Korea.

In response, the US Under Secretary of the Treasury for Terrorism and Financial Intelligence, Brian E. Nelson, sternly warned:

“Companies that seek to profit from circumventing sanctions by obscuring their involvement will be discovered and will pay a price… Firms that deal with blocked persons, even indirectly, will be penalised when their schemes implicate the US financial system.”

AMS can help firms and organisations steer clear of reputational, regulatory, and financial harm by avoiding entities with ties to sanctions.

How do you identify who’s high-risk?

Conducting in-depth screening on every client, supplier, partner, and donor is the ideal approach. But for many organisations, this is impractical—if not impossible.

The traditional method relied on manual searching and reviewing numerous news articles. However, this was time-consuming and prone to human error, making it challenging to sift through online information and find relevant data while avoiding false positives.

As a result, organisations turned to a risk-based approach which involved customising due diligence efforts based on the level of risk associated with a particular client or transaction. When higher risk was identified, a more comprehensive AMS became necessary.

Nonetheless, this approach raised a question: How can organisations efficiently carry out adverse media checks, especially when facing resource constraints?

Meet Xapien

Xapien streamlines and simplifies the adverse media screening process. By harnessing the power of AI and Natural Language Processing (NLP), Xapien can swiftly gather, analyse, and present comprehensive adverse media information in minutes, not days.

Here are a few examples of when Xapien’s AMS capabilities played a pivotal role in risk assessment and decision-making. 

RNLI

The Royal National Lifeboat Institution (RNLI) was considering working with an extreme sports safety equipment provider. Xapien helped them avoid potential reputational fallout by uncovering a class action lawsuit in the US and Canada. Despite UK-only manual searches showing no issues, the same faulty equipment was still being sold in the UK.

The Museum of London

A small team manages The Museum of London’s entire advancement practice with limited resources. Within just 12 minutes, Xapien revealed that a prospect’s organisation had ties to a foreign entity with investments in industries misaligned with the museum’s values. This crucial insight informed fundraisers to pause engagement with this prospect. 

Griffin

Griffin, a Banking as a Service (BaaS) provider, operates in a highly regulated environment where compliance is crucial. With Xapien, its AMS process underwent a transformation. When identifying a prospective company or supplier, they run its name through Xapien and the results are available in just 12 minutes. Xapien only analyses and summarises risks found in online content it’s confident about, making sure there are no false positives.

Want to see it in action?

Let Xapien do the heavy lifting: it can research, analyse, and it’ll turn those findings into a human-like written report in minutes. Fill in the form below to chat with our team.

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