Banks and financial institutions perform the transaction monitoring process to monitor transactions of the high-risk customers. This operation is nowadays observed in most sectors to ensure asset protection. The use of computerized tools to help monitor customer activity is effective in the modern world. These applications are utilized to track the financial transactions of the customers. Online trading platforms are increasing in number each day. These networks also undergo the transaction monitoring process. Digital platforms that involve finances like cryptocurrency and NFTs are complied with the law to perform transaction monitoring. The main concern is to prevent money laundering and secure financial platforms.
Purpose Of Transaction Monitoring Process
The transaction monitoring process is the operation of monitoring a client’s transactions. These transactions can include all sorts of interactions with the customer’s finances. For example, the banks record and track high-risk transactions in cash deposits, withdrawals, and transfers. The transaction monitoring process is an integral part of bank security systems as well. The Know Your Customer, KYC transaction are used to identify the client and their involvement in the process cycle. With verification of the client’s finances, the organizations can actively track suspicious activities.
Why Is Transaction Monitoring Process Necessary?
The operation to monitor transactions is necessary to prevent illicit activities within the systems. Money laundering is a major concern for every business and authorities have made strict laws to prevent it. In the past, the banking sector faced multiple data breaches, these attempts were caused due to inefficient fraud transaction monitoring methods. Research shows that 250 million people that are affected by online theft and transaction stealing in 2020.
Various authorities advised the deployment of a transaction monitoring process within their networks to keep track of clients’ transactions. As per FATF guidelines, all the banking sectors and financial institutions must develop a transaction monitoring system to monitor and streamline laws of suspicious transaction tracking.
The business transaction monitoring process marks red flags on all suspicious transactions. The transaction monitoring system further analyzes these marked transactions for any sort of risk involved. The banks and FIs perform ongoing AML (Anti Money Laundering) screening on high-risk transactions from the sanction list.
Benefits Of Transactional Screening
The process of transaction monitoring in money laundering attempts is effective as it tracks the transactions of the fraudsters.
Identify High-Risk Entries
The anti money laundering screening ensures the identification of high-risk entries that can be exploited for illegal causes. These risky transactions are associated with the size of the business a client opts for, its reach, and its sector. The customer profile is evaluated with an effective screening solution to track the transactions of the person.
Identify Vendors And Business Networks
The business transaction monitoring process also verifies the businesses in terms of evaluating their associated finances. Business networks and partners are also tracked with a transaction monitoring system to assess the risks of suspicious transfers. The business examination is on multiple factors.
- Size Of Corporation
The financial institutions already have complete profiles of the businesses that interact with them. The approximate size and growth of the business are identified by monitoring its inbound and outbound transactions. The corporation level provides a great deal of information about their activities.
- Geographic Reach
The reach of any business provides information about their spread network, associated partners, and customer involvement. The geographic reach is also evaluated by the transaction monitoring systems when detecting any sort of fraudulent activity within the system.
Transaction Monitoring Process And AML Compliance
As the AML screening effectively marks suspicious customer profiles by identifying their track records. The transaction monitoring system acts as an essential component in regulating AML compliance. It complies with all the AML laws that are presented to counter money laundering from financial systems. The transactional screening, monitoring, and review processes are active counterparts of the AML compliance. Real time transaction monitoring methods use AI-based solutions to intelligently identify the loopholes within the networks. Ongoing AML checks ensure the security of most transactional systems.
Conclusion
The transaction monitoring process is an integral part of most banking and financial systems. It also plays a vital role in regulating AML compliance. These laws are applicable to all individual clients and corporate businesses. Legal authorities like FATF and JMLSG (Joint Money Laundering Steering Group) have made the implementation of transaction monitoring systems for every critical firm. Active customer evaluation and transactional tracking are also made effective and easy with the new AI-based risk assessment systems.
