A business that conducts financial activities always has risks, such as money laundering, terrorist financing, corruption, and human trafficking. Therefore, Some international organizations such as FATF or government officials create AML / CTF laws. Businesses are obliged to comply with these laws. Organizations that do not comply with these laws may have to pay large fines.
Businesses need to be able to detect high-risk and suspicious activities automatically. Transaction monitoring solutions provide anti-money laundering and fight terrorist financing for your business. So why is it essential to have process monitoring software? How does transaction monitoring protect your business from money laundering activities? In this article, we'll discuss five reasons why AML transaction monitoring tools are required.
What is AML Transaction Monitoring?
AML transaction monitoring is a process used by financial institutions to detect and prevent illegal financial activities, such as money laundering and terrorist financing. This process involves continuous monitoring of financial transactions to identify and flag any suspicious activities. AML transaction monitoring tools, such as software and algorithms, are used to analyze transaction data and identify patterns or anomalies that may indicate illegal activities. This information is then used to take appropriate action, such as denying a transaction or reporting suspicious activity to relevant authorities. The purpose of AML transaction monitoring is to protect financial institutions from reputational and financial risks associated with illegal financial activities and to ensure compliance with AML regulations.
Transaction monitoring software alerts when a situation violates the rules and is against the customer profile during Customer transactions. Once the software generates an alarm, the transaction monitoring process conducted by AML is automatically stopped, and the cycle continues to be executed and reviewed by the Firm's Compliance or Risk Department. Suspicious transactions are reported to AML, CFT, and KYC regulators when a crime is detected in the customer's transaction. This report is known as the Suspicious Activity Report (SAR).
Some of the activities that are covered by the AML Monitoring process include:
- Currency exchange
- Withdraw/deposit
- Transfer/eft transactions
- Payment transactions
Why Is AML Transaction Monitoring Essential?
1. Expansion of Financial Transaction Circle
The rapid growth of financial transactions has created new challenges for financial institutions in terms of monitoring and preventing illegal activities. With an increasing number of financial transactions taking place every day, it can be difficult for financial institutions to keep track of all transactions and identify any suspicious activities. Additionally, more effort may be required to control electronic transactions. Therefore, having an AML compliance program is more critical than before. AML transaction monitoring tools help financial institutions monitor all transactions effectively, regardless of the volume and complexity. These tools use advanced algorithms and technology to identify and flag suspicious transactions, making it easier for financial institutions to detect and prevent illegal activities.
2. The Necessity to Comply With Changing Regulations
There is a global struggle against money laundering and terrorist financing. In line with this struggle, many laws and regulations were prepared for companies from the past to the present. Samely, new AML regulations continue to be published with the global challenge. Also, each country has specific AML/CTF regulations prepared by the government. For example, there are currently about nine act plans in the US Congress with AML content moving forward.
AML regulations are constantly evolving, and financial institutions must be able to adapt quickly to these changes to maintain compliance. AML transaction monitoring tools provide financial institutions with real-time updates on changes in regulations and help ensure that all transactions are compliant. These tools also provide financial institutions with the necessary tools and resources to stay up-to-date with the latest regulations and maintain a robust compliance program.
3. Detection of Financial Crimes
AML transaction monitoring tools are specifically designed to detect and prevent financial crimes such as money laundering and terrorist financing. These tools use advanced algorithms and technology to analyze transaction data and identify suspicious transactions. By using AML transaction monitoring tools, financial institutions can detect financial crimes more effectively and prevent them from happening in the first place.
4. Access to Necessary Information
AML transaction monitoring tools provide financial institutions with access to a wide range of information, including transaction data, customer information, and watchlist data. This information is crucial for financial institutions to identify and prevent illegal financial activities. For example, watchlist data helps financial institutions screen transactions against lists of individuals and organizations that have been identified as high-risk. By having access to this information, financial institutions can make informed decisions about transactions and ensure that they are complying with AML regulations.
In addition, the AML transaction tracking system should be clear and understandable for companies. At this point, companies can largely avoid their workload with an AML compliance team that is an expert in creating the right analytics and can save time.
5. Avoiding Risks and Financial Sanctions
There is no doubt that companies' most damaging factor is that AML transactions are not properly monitored. Also, there are many money-laundering scandals against this provision. These countless money laundering scandals that companies have been subjected to cost them dearly. For example, in 2018, more than $ 2.9 billion in fines were imposed by global financial regulators for AML disputes. In 2019, this number doubled. Thus, Companies have become increasingly aware of the need to implement effective AML transaction monitoring.
By using AML transaction monitoring tools, financial institutions can minimize the risks associated with illegal financial activities and avoid the potential for financial sanctions. These tools help financial institutions maintain a robust compliance program and ensure that they are meeting their regulatory obligations. In the event of a financial crime being detected, AML transaction monitoring tools can provide financial institutions with the necessary evidence and information to support enforcement actions.
Sanction Scanner: The Best Compliance for Your Business
Transaction Monitoring Solutions are one of the most effective methods to prevent money laundering. It enables businesses to act following AML, KYC, and CDD rules. Companies can set their own rules with transaction monitoring and report suspicious activities according to these rules. Through AML Transaction Monitoring tools, you can eliminate money laundering risks in financial transactions. Here's what you need to know about Sanction Scanner AML Transaction Monitoring Software:
1. False-Positive
It is called a false positive when transaction monitoring detects unsuspicious behavior and generates alarms as suspicious. For example, suppose you are a bank customer who has made multiple ATM withdrawals daily. In that case, AML transaction monitoring systems see your activity as suspicious activity, and the transaction monitoring sends urgent alarms to your affiliated financial institution. However, there may not be a suspicious situation. This situation is called a false positive alarm.
Sanction Scanner ensures that false-positive alarms are reduced by creating the most appropriate rules and scenarios for businesses. It can also be realized without the need for any coding knowledge. Through Sanction Scanner Transaction Monitoring Software, you can focus on the right alarms and reduce your workload.
2. Real-Time Monitoring
Sanction Scanner Transaction Monitoring has a real-time alarm system. Thus, it allows you to instantly see the processes' alarm levels determined according to the scenario and rules suitable for your business. Shortly, Sanction Scanner real-time alarm system provides intervention in suspicious activities as quickly as possible.
3. Compliance to Sector
Another possibility provided by Sanction Scanner AML Transaction Monitoring is that compliance solutions can change according to the sector. The finance sector has an independent and dynamic structure. It requires adaptation solutions that can be changed and improved. For example, you may have entered the industry as a small business and have grown over time. Your company's requirements will also vary accordingly. Sanction Scanner AML solutions comply with the needs of your business. So you can continue to improve without taking any risks.
4. Risk-Based Scorecards
Companies should conduct regular risk assessments against money laundering and terrorist financing risks. In addition to this, Sanction Scanner risk-based scorecards provide make advanced risk assessments based on country, currency, and customer segment criteria. Thus, you can protect your company from money laundering activities.
For more information, you can always contact us or request a demo.
