For financial institutions,Adverse media screening Higher false positive rates in the AML program are one of the major problems in the fight against money laundering and other financial crimes. These errors so often occur when the AML program in an organization flagged the legitimate transaction as illegal.
Generally, these types of false positive rates might not seem to hurt the business reputation, but these alerts often cause financial institutions to pay extra attention to the higher rates of errors and spend various resources to differentiate between legitimate and illegitimate transactions.
Is there any solution to reduce the false positive rates?
There is always a solution to a problem, Adverse media screening has emerged as a key solution to combat such types of issues, as it helps financial institutions apply a comprehensive approach to verify the customer identity and reduce the risk level as well as the higher false positive rates.
In this blog, we’ll explore the importance of how adverse news screening helps organizations cut down on false positives and improve the overall effectiveness of their AML compliance programs.
Understanding False Positive
If the AML system flagged the transaction as suspicious but the transaction is legitimate, this is known as a false positive. Here are some of the reasons why the AML false positive occurs in adverse media checks.
- Name Matches: one of the major reasons for higher false positive rates in any organization is the result of name similarities between the legitimate and those on the sanctions, pepe, and watchlists.
- Outdated Information: if organizations still rely on traditional screening methods, there are higher chances of false positive rates because of the outdated data and information stored in the systems.
How Adverse Media Screening Works
Searching for news that could be beneficial for financial institutions in combating money laundering and other financial crimes is part of the adverse media compliance program. The process involved getting publicly available negative information about individuals and entities such as news articles, blog posts, social media, and other sources that are not accessible to common people.
Screening against Adverse media data is essential for businesses to stay compliant with the AML regulations and mitigate the chances of money laundering crimes.
However, if you have old data related to adverse media screening, there are some ways that can help your organization reduce the AML false positive rates in adverse media screening.
1. Incorporating Broader Data Sources
Unlike traditional adverse media screening, which mostly relies on old-fashioned screening style and databases or commercial lists that are not updated.
If businesses have an online adverse media monitoring system with databases updated, there are higher chances of getting very rare false positive rates,
which means compliance teams can access real-time data that paints a more comprehensive picture of a person or business’s risk profile.
2. Contextualizing Risk
One of the main benefits of adverse media screening is its ability to provide context around an individual or entity’s risk.
Because the simple match name on a sanction list does not give much information about the legitimacy of any transactions.
But when you have the advanced and updated Adverse media screening, it offers businesses the background history of companies, their transaction history, and their relation with any suspicious entities.
This reduces unnecessary alerts and ensures that legitimate customers are not unduly flagged.
3. Filtering Out Irrelevant Matches
Adverse media screening can filter out irrelevant matches that would otherwise generate false positives. For example, it can distinguish between individuals with similar names based on location, date of birth, or other unique identifiers mentioned in the media. This ability to identify and exclude irrelevant matches helps compliance teams focus on genuine risks and reduces the workload caused by false positives.
4. Improving Accuracy Through Negative News
Adverse media screening focuses specifically on negative news that relates to suspicious or criminal activity. This helps to cut through the noise of general information and allows organizations to hone in on content that is most relevant to their AML efforts.
Instead of relying on generic or unverified data, adverse media screening pulls in targeted information about crimes like money laundering, bribery, or financial fraud, further reducing the chances of false positives.
| Scenario | False Positive Rate | Time Spent Investigating (Per Week) |
| Before Implementing Adverse Media Screening | 50% | 12 hours |
| After Implementing Adverse Media Screening | Less than 10% | 3 hours |
Real-World Example of Adverse Media Screening Success
Let’s consider a financial institution that was struggling with a high rate of false positives using traditional watchlist screening methods. After implementing adverse media screening, they experienced a significant drop in false positives from 50% to less than 10%. This allowed the compliance team to reduce investigation time by two-thirds, freeing up resources for more critical tasks.
