Adverse Media Monitoring: Mitigating High-Risk Vendor Risk Exposure for Banks
Adverse media monitoring is a valuable tool for banks to stay ahead of potential risks associated with their third-party relationships (vendors). Reports of declining revenues, sanctions violations, or cybersecurity incidents involving a vendor can signal significant financial risks. Moreover, such news can harm a bank’s reputation, jeopardizing its standing with customers, investors, and regulatory bodies that require banks to monitor their vendors.
For instance, European banks must comply with DORA1, which mandates financial institutions to monitor their ICT vendors. In the United States, the OCC Guidance for Third-party Risk Management requires continuous monitoring of third parties2.
Adverse Media Monitoring for Timely Risk Detection
At Owlin, we define adverse media monitoring as searching official and unofficial online sources for negative news about a third party (after the onboarding process is completed).
Figure 1: Examples of relevant adverse media during the monitoring phase as mentioned in the Third-Party Risk Management: A Guide for Community Banks3
In contrast to conventional sources like financial statements and official ratings, which offer retrospective insights, continuous adverse media monitoring presents a dynamic and real-time source of information. This proactive approach enables prompt detection of critical details, providing early warnings for potential risks from recent events.
Challenges in Adverse Media Monitoring
Monitoring a corporate ecosystem for adverse media presents several challenges. Manual verification of adverse media is time-consuming and labor-intensive, often leading to costly errors. This challenge is magnified when managing many vendors and dealing with content in multiple languages. Additionally, effective adverse media monitoring requires continuous effort to ensure comprehensive risk mitigation, not just sporadic checks.
The Role of Technology in Mitigating High-Risk Vendor Exposure
Given these challenges, banks should proactively seek intelligent technological solutions to seamlessly integrate adverse media monitoring into their third-party risk management frameworks. By leveraging technology, banks can conduct swift and accurate assessments of adverse media, surpassing the capabilities of manual efforts. This proactive approach enables prompt detection of critical details, providing early warnings for potential risks from recent events.
Importantly, regulators are increasingly allowing the use of advanced technology for core compliance processes. A notable example is the ruling in favor of Bunq, an online bank, which highlighted the acceptance of AI for regulatory compliance.
| Bunq Case Study: AI in Compliance In October 2022, a Dutch appeal court ruled that the Dutch central bank was wrong to ban Bunq from using AI techniques and data analyses to screen its clients for money laundering. The central bank had argued that Bunq was not complying with anti-money laundering legislation, which requires banks to run risk profiles of clients and monitor their transactions. However, Bunq maintained that AI was the most effective method for this task. The court ultimately sided with Bunq, stating that the central bank had not sufficiently proved that Bunq’s methodology was non-compliant with the legislation. This ruling was significant as it paved the way for broader acceptance of AI in regulatory processes, promoting innovation and potentially enhancing the safety of the financial sector. |
Discover Owlin for Adverse Media Monitoring
At Owlin, we specialize in delivering advanced technological solutions for adverse media monitoring, making us the ideal platform for banks looking to enhance their risk management practices. Leveraging AI, we provide detailed reporting and analytics to give banks early warning indicators about their corporate ecosystem, including vendors, effectively safeguarding their operations and reputation.
Schedule a demo!
Interested in discovering how Owlin can revolutionize your risk management processes? Schedule a demo today.
- 2024, DORA, https://www.eiopa.europa.eu/digital-operational-resilience-act-dora_en
- 2023, OCC, Guidance for third-party risk management, https://www.occ.gov/news-issuances/news-releases/2023/nr-ia-2023-53.html
- 2024, OCC, Third-Party Risk Management A Guide for Community Banks https://www.occ.gov/news-issuances/news-releases/2024/pub-third-party-risk-management-guide-for-community-banks.pdf
- 2022, Dutchnews.nl, Bunq can use AI to check for money laundering, court rules https://www.dutchnews.nl/2022/10/bunq-can-use-ai-to-check-for-money-laundering-court-rules/?utm_content=224996923&utm_medium=social&utm_source=linkedin&hss_channel=lcp-1211148#risk