Adverse Media Scan: How Gumshoe Reads 90 Days of News for Your Suppliers

Adverse media scans are a crucial component of due diligence, allowing businesses to identify potential risks associated with their suppliers. At Gumshoe, our premium Adverse Media Scan check provides an in-depth analysis of global news coverage for your suppliers over the last 90 days, flagging enforcement actions, litigation, and misconduct. But what exactly does this check cover, and how can you use the results to inform your procurement decisions?

What the Adverse Media Scan Covers

Gumshoe's Adverse Media Scan premium check searches global news coverage for your suppliers over the last 90 days, identifying potential risks associated with enforcement actions, litigation, and misconduct. This includes coverage from reputable news sources, as well as regulatory announcements and court records. By analyzing this data, our check provides a comprehensive view of your supplier's reputation and potential risks.

The check covers a range of topics, including:

• Enforcement actions: fines, penalties, and other regulatory actions taken against your supplier.
• Litigation: lawsuits, settlements, and other court actions involving your supplier.
• Misconduct: reports of unethical behavior, corruption, or other forms of misconduct by your supplier or its employees.

The Early-Warning Value of Media Coverage

Media coverage often precedes regulatory records by weeks or even months. By monitoring news coverage, businesses can identify potential risks before they become formal regulatory actions. This early warning can provide valuable time to assess the situation, communicate with the supplier, and take corrective action to mitigate any potential risks.

For example, in 2020, the Australian Securities and Investments Commission (ASIC) took action against a number of companies for breaching their continuous disclosure obligations. In many cases, media coverage of the breaches occurred weeks or even months before the ASIC took formal action.

Confirming a Headline Refers to Your Entity

When reviewing the results of the Adverse Media Scan, it's essential to confirm that any matched headlines refer to your supplier entity and not a similarly named business. To do this, review the article or news source to ensure that the entity mentioned is indeed your supplier.

Check for specific details such as:

• Company name and ABN.
• Address and contact information.
• Industry and business description.

Understanding Adverse Media Scan Statuses in Gumshoe

Gumshoe's Adverse Media Scan feature provides a comprehensive review of 90 days of news for your suppliers, assigning a status based on the findings. The status can be PASS, WARN, FAIL, or NA (Not Applicable). Understanding these statuses is crucial for effective supplier due diligence.

A PASS status indicates that no adverse media coverage was found for the supplier in the 90-day period. This does not guarantee the supplier's integrity but suggests a clean record in the reviewed timeframe.

Interpreting WARN and FAIL Statuses

A WARN status signifies that some adverse media coverage was found, but it may not be directly related to the supplier's core business or may be outdated. This status warrants further investigation to determine the relevance and impact of the adverse media coverage.

A FAIL status indicates significant adverse media coverage, such as fraud, corruption, or other serious issues, that directly affects the supplier's integrity and reliability. This status requires immediate attention and may necessitate re-evaluation of the supplier relationship.

Example: Adverse Media Scan Results for a Supplier

Let's consider an example of a supplier, XYZ Pty Ltd, with an ABN of 12 345 678 901. The Adverse Media Scan results are as follows:

Adverse Media Scan Results for XYZ Pty Ltd

Article Title	Publication Date	Status
XYZ Pty Ltd Fined $50,000 for Environmental Breaches	2022-02-15	FAIL
XYZ Pty Ltd Wins Award for Innovation in Sustainability	2022-01-20	PASS
Former Employee of XYZ Pty Ltd Charged with Embezzlement	2021-12-01	WARN
No adverse media coverage found	N/A	PASS

This example illustrates the different statuses that can be assigned based on the adverse media coverage found. The FAIL status for the environmental breaches suggests a significant issue that requires immediate attention. The WARN status for the former employee's embezzlement charges may warrant further investigation to determine the relevance and impact on the supplier's integrity.

Uncommon Insights

When conducting an Adverse Media Scan, it's essential to consider the broader regulatory context. For instance, under Section 12DL of the ASIC Act, the Australian Securities and Investments Commission (ASIC) has the power to ban individuals from managing companies if they have been involved in phoenix activity or other serious contraventions. An Adverse Media Scan can help identify such risks by highlighting suppliers' involvement in phoenix activity or other questionable practices. The Australian Taxation Office (ATO) also plays a crucial role in supplier due diligence. Under Section 255-10 of the Taxation Administration Act 1953, the ATO can issue tax penalties for non-compliance. An Adverse Media Scan can alert you to suppliers' tax-related issues, helping you avoid potential risks. ASIC's enforcement patterns also offer valuable insights. For example, in 2020, ASIC reported a total of $1.3 billion in penalties and compensation ordered against individuals and companies (ASIC Annual Report 2020). By conducting an Adverse Media Scan, you can identify suppliers that have been involved in similar contraventions. Furthermore, an Adverse Media Scan can help you identify suppliers that have been involved in anti-money laundering (AML) and counter-terrorism financing (CTF) breaches. Under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, businesses are required to report suspicious matters to AUSTRAC. By identifying suppliers with a history of AML/CTF breaches, you can mitigate the risk of non-compliance.

Key Takeaways

• Regulatory risks are real — ASIC's enforcement patterns and the ATO's penalty regime can have serious consequences for non-compliant suppliers.
• Phoenix activity is a red flag — involvement in phoenix activity can lead to ASIC banning individuals from managing companies.
• AML/CTF breaches can be costly — failure to comply with AML/CTF regulations can result in significant penalties and reputational damage.