A sanctions hit has two endings. Either the person on your file is the person on the list, or they are not. Bad press has neither ending. It is not something you clear. It is something you rate, and the rating is worth exactly what you wrote down beside it.
ICPAC's Sanctions Directive says so in terms, and it says it first. Annex I is headed Due diligence steps in determining a true match, and its Step 1 comes before any comparing of names. Is the match against a sanctions list or is it a match for any other reason, e.g., PEP, adverse media etc.? If the match is against a sanctions list, you proceed to the next step. If the match is for any other reason, you do not have a match.
Plainly: your screening tool used the word, and the Directive takes it back. A name that surfaced because of a news story never entered the process that ends in a true match, so it cannot leave through that door either.
Then look at the exit most firms reach for. The Directive defines a false positive as any positive match to listed persons and entities for which, following investigation and assessment, it is concluded that it does not relate to a designated person. The definition is anchored to lists. Our reading, not the Directive's words: a finding that was never a positive match to a list cannot be closed as a false positive, because the term does not reach it. And the sanctions track genuinely closes. A positive match must be properly investigated and must be immediately reported to the compliance officer, and where an existing client is a true match the firm must take appropriate measures to immediately freeze all services provided to that client, except services for which the competent authority has granted prior authorization, and all the funds, financial assets and economic resources of the designated person it has in its possession, and/or refrain from executing any transaction for the benefit of or on behalf of the designated person. In plain terms: a confirmed sanctions hit stops the services and locks the assets, subject to any licence, or stops the transactions. Adverse media is given no equivalent ending anywhere.
So what is it instead? ICPAC's AML Directive, issued under sections 59(1)(d) and 59(4) of L.188(I)/2007, answers at 5.3.5, and the answer is a risk question with a filing requirement attached. Firms are required to conduct background screening and perform background checks against sanctions lists and PEPs lists and in order to determine whether any negative information exists regarding the potential or existing client that might affect the risk emanating from the client. Background screening should form part of the initial CDD process and during any change-driven updates of the CDD or during scheduled or routine CDD updates. The results of the background screening should be appropriately documented and incorporated in the risk based process of the firm, e.g., high risk clients.
Read the modals before the nouns. Required, for the screening itself. Should, for when it happens and for what you do with the result.
Now read the nouns. The paragraph names two kinds of list, sanctions and PEP. The words adverse media are not in it. What sits on the other side of the sentence is not a list at all: negative information, tested against one question, whether it might affect the risk emanating from the client. And when the paragraph names what you keep and explain, it names partial matches as well as false positives, which should be maintained with an explanation on why they do not pose a concern or why they have been disregarded as a match for further examination. Both of those are list words. Neither describes a newspaper.
The same paragraph is where the tooling appears, and it does not sort by source either. Depending on their size, nature and type of clientele, firms are encouraged to subscribe in a specialist electronic database. Firms using specialist databases should comprehend how these databases are populated and need to ensure that all findings from the database used are corroborated thoroughly before and during the client relationship. All findings. Encouraged to subscribe; then, if you do, corroborate everything it hands you.
Where the Directive does write adverse media, it writes it as material you gather, not as a hit you dispose of. The enhanced due diligence table under 5.7.4 sets against clients of the Cyprus Investment Programme: more details and supporting documentation on source and size of wealth, background, controversies, adverse media, purpose of application and other. Annex II, headed Higher risk, carries a risk-factor list whose second item is the client's and the client's beneficial owner's reputation i.e. is there adverse media surrounding the client and the beneficial owners, are they subject to previous suspicion report or have they been convicted, etc. An i.e. introduces the examples and an etc. closes them, so the list inside the item stays open. And the fund documentation list in Annex III, among documents to collect and retain where applicable, asks for evidence of background screening searches considering any negative media. Evidence of the search. Not resolution of the finding.
ICPAC's Guidance to Members on Transaction Monitoring, updated August 2022, is guidance rather than directive, and it holds the same shape. Its list of documents and services a Member may come across is introduced as indicative and as non-exhaustive, and item 22 on it is internet findings: websites of counterparties, references in the press of the transaction, references to any adverse media on the client and counterparties, and so on. Its suggested working programme turns that into a question with no closing state. Have any adverse media findings been identified through the Internet on the client or the counterparty? If so, has the relevant AML risk been assessed?
Set that beside item 21 of the same working programme, two items earlier, on searching the client and counterparties against sanctions, PEP and financial crime lists. There, if a true match has been identified against a sanctions list, the question is whether all provisions based on the relevant Sanctions Program have been followed, and ICPAC is to be told without delay. If a true match has been identified against a PEP list, the question is whether the relevant AML risk has been identified and assessed. Two kinds of list hit, two different endings, and both of them are endings. The adverse media item asks only whether the risk was assessed.
None of those passages cites a section of the Law for the adverse-media element. 5.3.5 cites none. The table under 5.7.4 cites none. The annex list runs under its own heading with no statutory reference. The Guide asks a question. This is a reading of ICPAC's own instruments; other supervisors write their own, and they are not covered here.
Which leaves the difference that shows up on the file. A sanctions hit is closed by a conclusion about identity, and the Directive supplies the two words that close it. An adverse-media finding is closed by a judgement about risk, and nobody supplies the words for that. You write them, or there is nothing there.
A sanctions hit you clear. An adverse-media hit you rate, and the rating is only real where you wrote it down.
Not legal advice. Verify against the primary source before acting.
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