The techniques used by hackers and sophisticated con artists to cover up and obscure the sources of the revenues of their offenses are constantly improving. All of this may be avoided with a robust transaction monitoring process. The regulators who oversee banks and other financial firms are raising their standards. How do they recognize, stop, keep an eye on, and report their suspicions when they are being used to launder illegal money?
For the aim of describing and identifying any questionable transactions to and from current clients, all banking institutions must have a comprehensive transaction program in place. As a result, a real-time transaction reporting system is the procedure that helps financial institutions carry out audits of the dealings of their clients. It never matters if the client is a corporate customer or a member of a retail sector. KYT compliance made identifying, detecting, and preventing skepticism in clients’ transactional behavior possible.
Process of Transaction Monitoring System
Transaction monitoring is a method that constantly compares client data between what was anticipated at the time of initialization and what is presently the correct figure? For example, if the beneficial owner or any legal representative of a company created a trading account with any financial institution and stated that they would make 20 transactions totaling $20,000 per year, that would be an anticipated $1 million every trade, or $1.6 million a month. The real-time transaction reporting system has the anticipated customer trading volume and periodicity hard-coded therein so that it would track the consumer.
Following the financial organization’s adoption of the consumer’s pertinent data, the transaction tracking system begins to compare the previously stored information to the transactions the customer starts making. If, for instance, there really is a 10% mismatch between the information stored and the transactions, and the 10% limit is crossed, the transaction is marked as suspicious.
The transaction financial analyst would then need to analyze it manually to decide whether it was actually suspicious and warranted more investigation, or whether it was fine.
Transaction Monitoring Service in AML Compliance
Following initial identity verification, every account is assigned a specific risk level based on an analysis of the KYC as well as the KYB procedure. From that point on, the real-time transaction monitoring system used in continuous AML testing keeps a record of any changes in the customers’ withdrawal/deposit patterns at regular time intervals. The artificial intelligence (AI)-powered payment monitoring system quickly detects doubt and dramatic advances in the payments being conducted and identifies amounts that exceed the specified sum.
Is Transaction Monitoring Always Automated?
The short answer is no, a real-time transaction reporting system needs human intelligence from an expert or a group to ensure that the program is running efficiently. This is true even though the process for KYT validation automates many parts of the screening process and decreases the false positive rate.
Considerations Regarding Transaction Monitoring Software
Similar to any new method being introduced, there are a number of factors that must be taken into account for it to work, produce error-free outcomes, and perhaps most importantly, satisfy the regulatory need to satisfy the corporate requirements. Some factors to take into account are:
- identifying the precise risk factors
- educating staff on data analysis and spotting red signs
- transparent reporting procedure to the MLRO and AML compliance officer
- full-featured management data
- autonomous quality control and regular system maintenance
The Disadvantage of Not Having a Transaction Monitoring Service
Any financial organization’s AML and CFT system now include a transaction monitoring device, so skipping this step must not be taken for granted. This system has grown to be an essential part of the program.
Without an efficient know your customer transaction system in place, whether this is outsourced to just a third-party merchant or maintained in-house, malicious actors can use the financial company for illegal activities, that should not only be viewed as aiding such action by the regulatory agencies but will also lead to a serious sanction. The financial firms’ reputations will be destroyed.
Final Thoughts
To broaden business clients and go forward with genuine risk-free customers, every financial industry needs a transaction monitoring solution. A real-time transaction reporting system supplier offers the ability to rapidly identify abrupt and suspicious changes in clients’ transactional behaviors, which aids financial institutions in long-term planning as well as decision-making. Businesses need a rigorous transaction monitoring solution in order to avoid paying hefty non-compliance penalties and maintain the trust of their customers.