Companies increasingly rely on third-party service providers and partners to optimise their operations and drive growth in today’s interconnected business environment. However, this reliance comes with risks, particularly when onboarding entities with a history of non-compliance, unethical practices, or controversies.
Case in point, in January 2025, word got out that a Nigerian HR solutions provider was likely under investigation by the LIRS and EFCC for allegedly failing to remit taxes and pensions for its clients, many of whom were tech outfits. However, it will not be the first time the company has made headlines for the wrong reasons. In 2022, allegations of being a toxic workplace led to the temporary resignation of its CEO. Then, in 2024, startup founders took to X (formerly Twitter) to accuse the company of not remitting its clients’ taxes. This instance underscores the importance of negative news screening as part of due diligence, especially to identify red flags at vendor onboarding and during the business relationship.
Negative news screening, also known as adverse media screening, is the process of reviewing publicly available information about an entity or individual to assess potential risks. It serves as an early warning system, helping companies identify and mitigate these risks before they escalate. In a landscape where trust and compliance are paramount, negative news screening is not just a checkbox—it is a cornerstone of responsible business practices.
The case of the Nigerian HR solutions company serves as a cautionary tale. Had some of its more recent clients conducted thorough negative news screening, they might have uncovered the pattern of controversies, enabling them to make more informed decisions. Negative news screening is not just about avoiding regulatory fines; it is about protecting a company’s reputation, ensuring compliance with local and international laws, maintaining trust with stakeholders, and ensuring business continuity.
Negative news screening can be conducted through both manual and automated methods, each with its own advantages and limitations. Manual screening involves a dedicated team reviewing news articles, social media, legal records, and other publicly available information to identify potential risks. Automated screening leverages technology, such as artificial intelligence and machine learning, to sweep through vast amounts of data from news outlets, social media, regulatory databases, and other sources. While manual screening is arguably more cost-effective, it can be time- and labour-intensive. While automated screening is faster, there is commonly the occurrence of false positives—instances where the system incorrectly flags an entity due to similarities in names or other factors. Combining automated methods with a robust manual review can help resolve such instances.
To maximise the effectiveness of negative news screening, there are various best practices organisations can adopt. One is to establish and regularly update risk indicators based on industry standards, regulatory requirements, and organisational values (risk indicators may include regulatory violations, legal disputes, controversial behaviour, reputational damage, social media backlash, etc.). It is also important to rely on multiple data sources, including news outlets, regulatory databases, and social media, to capture a comprehensive view of potential risks. Employees involved in the screening process should be well-trained and aware of the latest industry trends and regulatory updates. Given that not all vendors pose the same level of risk, more resources should be allocated to screening high-risk entities, such as those operating in regulated industries or jurisdictions with a history of corruption.
Read also: Nigeria calls for global action against fake news
The recent allegations against a Nigerian HR company serve as a stark reminder of the importance of negative news screening in the due diligence process. By identifying potential risks before onboarding a vendor, companies can protect themselves from financial, legal, and reputational harm. Whether implemented manually, automatically, or through a hybrid approach, negative news screening is an essential tool for navigating the complexities of modern business and, in the broader sense, joining in the fight against financial crimes.
About the writer:
Tayo Fabusiwa is a Financial Crimes Compliance professional and a Lawyer. [email protected].
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