An effective financial crime framework is built from an effective and appropriate screening program for PEPs, sanctions, and adverse media. However, adverse media is considered a grey area due to the fact that it is something regulated businesses are expected to have processes for, despite the fact that it isn’t used as a control requirement by most authorities. However, in May of 2022, The Wolfsberg Group published an FAQ document on screening for negative news, referred to as NNS, which covers everything from the very concept of negative news to specific elements of quality assurance. There are 29 questions in total, but we’re going to break down the most important ones here. Read on for all the details.
1. What is negative news?
The Wolfsberg Group outlines negative news as “information available to the public domain which financial institutions consider relevant to the management of Financial Crime risk”.
2. Why might a financial institute conduct NNS?
The purpose of NNS is to enhance the awareness of any potential financial crime risk to a financial institution. It’s useful to supplement customer due diligence and identify risk factors. It also fights financial crime by revealing a firm’s involvement in criminal activity, informing the risk assessment, investigating suspicious activity, and identifying risks and controversies around customers’ source of wealth.
3. Can NNS be conducted without excessive manual resources?
The Wolfsberg Group advises that financial institutions should determine the extent, timing, and configuration required for their screening and approach with the goal of optimizing effectiveness to avoid using too much valuable manpower.
4. What factors should a financial institution consider when establishing NNS?
There are two factors outlined by The Wolfsberg Group, made up of risk categories on screen, for example the types of crime or event in scope like human trafficking, terrorism, etc., and the maturity, i.e. the stage of the crime, like allegation, charged, conviction, etc.
5. What information might be excluded by the NNS?
A NNS might exclude any information that isn’t considered relevant to financial institutions, like civil proceedings, speeding fines, etc.
6. What does Reputational Risk mean?
The Wolfsberg Group defines reputational risk as “the risk of negative public perception with respect to the FI’s association with a customer or business relationship which may or may not be relevant from a Financial Crime perspective”. However, this might broaden into vendors or third-party suppliers. There is more detail on this on the FAQ document.
7. What factors should be considered when determining the scope of NNS?
The Wolfsberg Group advises to keep in mind the products the customer uses, the segment to which the customer belongs, where the customer is based, the status of their internal risk rating, and the inherent risks and financial crime threats in the financial institution.
8. What Risk-Based decisions may a financial institution need to consider in the context of NNS?
Risk-based decisions, according to The Wolfsberg Group, might include the type and scope of screening, media sources, risk categories and stages, timelines, alert filtering criteria, data purge and operating model.
9. What are the key terms used in NNS in different languages?
The key terms are transliteration, transcription, and translation. Depending on the geographical location of the financial institution, they might need to conduct screenings in different languages.
10. How might one determine the credibility of a source?
Sources for negative news mainly come from the internet where there is a good amount of misinformation, so it’s important to check the sources. Check the media type, the content, the geopolitical context, redundancy, editorial coherence, and website appearance to determine a good source.
11. What factors might be considered when undertaking an evaluation of their negative news solution?
The Wolfsberg Group suggests evaluating the screening solution by looking at the coverage, the data, the matching, the archive, the translation, the scalability, the reporting, the traceability, and the data sharing. More detail on each of these can be found on the FAQ document.
12. What factors should be considered when determining an operating model for negative news alert investigations?
The Wolfsberg Group FAQ document outlines that a “clearly defined end-to-end operating model and framework” be in place to effectively collect and conclude alerts.
13. What is the difference between rule-based and risk-based alert management?
A rules-based approach is a set of steps required to be completed to enable an alert investigation outcome to be determined, whereas a risk-based approach allows for the use of additional human judgment.
14. What topics should be included in the procedures used by staff performing NNS?
Topics can include roles and responsibilities, assessment and prioritization of alerts, decision making, locating further information, referrals, recording of outcomes and rationale, positive match escalation approach, and training.
The document from The Wolfsberg Group also covers what might be involved in the training program for staff who are performing NNS, tools for screening, considerations for quality control, key management information, and the key areas that financial institutions should give consideration. All of these topics are covered in great detail in the FAQ document. Find out more by visiting the Wolfsberg Group website.
If you or your business require assistance or support with ensuring compliance with these requirements, then please contact us today.