Transaction monitoring is a system that keeps track of customer transactions like deposits and withdrawals etc. its cost is high, labor-intensive, and prone to trigger factors. Transaction monitoring is obligatory for financial institutions. For those transactions that are being suspected or seemed suspicious, the transaction monitoring system identifies whether the suspicions are true or false. Businesses that come under the money laundering regulations require a transaction monitoring system. Transaction monitoring software is a key factor in AML – government regulates anti-money laundering procedure.
The software keeps a record of every transaction and takes the process through risk measurements. Transaction monitoring software depends on several factors that include:
- Section, size, geographic coverage, intricacy
- Customer IDs
- Organizational culture
- The risk associated with operations
TMS blocks suspicious actions or suspects like:
- The unusual transactions or activities of bank accounts
- Transactions that exceed the required value
- Transaction velocity
- If the source of funds either inbound or outbound is unknown
- International or domestic transfer exceeding a limited value
The data in suspicious transactions assembles in a special file of suspicious transaction reports.
The Risk-Based Approach
It is up to different businesses what transaction monitoring system they adopt, and what risk-approach regulators would expect to see to approach anti-money laundering activities for high-risk profile customers with customer due diligence. The risk-based approach adopts the FATF’s globally introduced directions. The Financial Action Task Force (FATF) guides the financial institutions to maintain the width and depth of their transaction monitoring system (TMS) following the procedures of risk assessment. The ongoing transactions or customer due diligence should happen on regular basis triggered by some transactions.
The frequency and severity of transactions reduces automatically when the risk factor is less. But when the risk rate is higher, the enhanced customer due diligence is in line with risk management procedures.
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Suspicious Activity Report (SAR)
As soon as the transaction monitoring system suspects suspicious entry – all data is compiled into suspicious activity reports (SAR). Suspicious activity reports SAR seems beneficial to AML (anti-money laundering) because the higher authorities rely on these reports for criminal investigation or taxation cases. Submission of SAR is done via online websites.
Transaction Monitoring Products In AML
- Advanced transaction monitoring – that provides risk-based evaluations, made reports about suspicious activities
- Fraudulent Transactions – provides a range of observing and resolution potential
- Multijurisdictional monitoring – provides algorithms minimizing triggers without making a comprise of identifying screening testing
- Investigation efficiency – reduces triggers and gives primary importance to the investigation
KYT – Know Your Transactions
(KYT) knowing your transactions is the key to fight with money laundering transactions. It’s a process mandatory for financial institutions to monitor different businesses after analyzing their data. Analyzing data will help create better conclusions and the most important part provides accuracy. Transaction laundering and money laundering are closely associated with each other. The main difference is just that transaction laundering is held online.
People who execute the process of transaction laundering create a shell website that seems normal from the outside. While conducting businesses with fraudulent activities like illegal transactions or card networks that are unknown to banks. KYT verification is about monitoring the customer transactions so that no suspicious activity is possible. KYT transactions like bills or card transactions, remittances, cash, cross-border transactions, etc. With the right tools and resources, KYT know your transactions can be easily managed both effectively and efficiently. Digital KYT is a preferred process that reduces the risk of fraudulent activities that might happen in the future.
KYT Solution Providers
After clients go through the stage of KYC know your customer, only then does KYT know your transactions implies on them. The exact information about the customers can be possible through (KYCC) know your customer customer. Know your transactions KYT is another factor in the AML process. To verify KYT, the information required of clients are:
- First name and last name
- Date of birth
- Home address or office address
- Phone number
(KYT) Know Your Transactions Limitations
The limitations only arise when financial institutions don’t accept the adequate amount of transactions that combat the process of illegal transactions.
With the surge in attempts of money laundering and financing through illegal processes, businesses have impatiently introduced the transaction monitoring system in their businesses. The transaction monitoring system provides safety and security to any business or institution. Transaction monitoring help block the illegal activities to meet the anti-money laundering requirements. TMS helps in the detection, investigation, and monitoring the customer transactions. It is a system that makes businesses one step ahead of criminals. An effective transaction monitoring system successfully identifies suspicious transactions and separates them from innocent ones.