What is Ongoing Monitoring?

In order to comply with AML (Anti-Money Laundering) regulations, you need to be constantly vigilant rather than trying to manage these processes with one-off confirmations. In these continuous efforts, Ongoing Monitoring plays an undeniably crucial role. To achieve constant vigilance, it continuously analyzes and reviews customer activities, risks and transactions. In this post, we will explain Ongoing Monitoring in detail. 

What Is Ongoing Monitoring?

Ongoing Monitoring is an AML solution that allows financial institutions and other liable companies to dynamically assess risks in real time by screening customers, transactions and activities. The importance of ongoing monitoring software becomes even more evident when periodic KYC reviews fall short. 

How Does It Work?

We have already mentioned that it works by regularly examining the activities of customers. If you are wondering about its details, we are here to explain it. 

In the first step, you should classify your customers into risk tiers. These risk tiers should be based on factors like their location, industry, transaction types or politically exposed persons. For example, we allow you to adjust the frequency of auto scans according to the risk levels of your customers. You can also reduce false positives by choosing which data, such as Sanctions, PEPs, Watchlists to scan your customers with. If you decide that they are higher-risk, you should monitor them more closely and frequently. You will also need to have your controls established to address these risks. The most common methods used in this part are identity verification, monitoring rules and escalation procedures. 

Now, all you have to do is the ongoing monitoring of customer information and transaction data in order to detect any anomaly or unusual pattern that could arise. Automated Ongoing Monitoring, like Sanction Scanner’s, checks high-risk customers on Sanction and PEP lists periodically. If you spot unusual activity, you must file a suspicious activity report (SAR), which is necessitated by several regulators. Also, do not overlook the importance of keeping the relevant documentation because you will need them during future audits. Having already mentioned the audits, you must conduct regular audits to be sure that your monitoring processes are up-to-date and effective. 

What Are the Requirements for Ongoing Monitoring?

Almost all prominent regulators in the world, such as FATF, EU AMLD, FinCEN and FCA, enforce Ongoing Monitoring in order to ensure compliance, identify potential risks and make necessary adjustments to mitigate those risks. However, it is not enough by itself. You must continuously review the transactions, focus on high-risk customers, update customer information and report any suspicious activity through SARs.

Let’s give an example of what could happen, when a business doesn’t adhere to these regulations. According to Reuters, The UK's financial regulator, the FCA, fined Barclays £42 million for the shortcomings in KYC (Know Your Customer) and Ongoing Monitoring. 

Examples of Regulated Industries

Let’s start with banks and traditional financial institutions, who must continuously monitor transactions. Crypto Exchanges are also obligated to monitor illicit wallet use and several other processes. Even high-value goods dealers must implement proper monitoring since they handle large amounts of money. This list goes on with examples such as MSBs, real estate, gaming, gambling, law, accounting and others. 

In order to show how these obligations are not limited to traditional financial institutions, let’s give an example from the gambling industry. According to AUSTRAC’s website, Australia’s financial authority alleged that Mount Pritchard District and Community Club group has violated the AML laws, and subsequently launched civil penalty proceedings. Among the AUSTRAC’s allegations, it is possible to see multiple failures in monitoring processes.

Key Triggers for Ongoing Monitoring

There are several key triggers for Ongoing Monitoring:

• Someone changing their personal data, such as their address, job and ownership;

• Committing large or suspicious transactions like structuring, unusual wire transfers, cash-intensive activity;

• Getting included in adverse media coverage;

• Filing bankruptcy;

• Experiencing radical changes in transaction patterns;

• Updating business registration status;

• Getting listed on sanctions or PEP updates…

Ongoing Monitoring vs. Transaction Monitoring

It is not hard to confuse some aspects of these two monitoring types, so let’s list the key differences between these. The first difference comes from their scope; Ongoing Monitoring continuously reviews the customer relationship as a whole, while Transaction Monitoring conducts real-time or batch analysis of individual transactions. Their goals also differ; Ongoing Monitoring aims to ensure that customer activity stays consistent with their profile but Transaction Monitoring aims to spot money laundering, terrorist financing and fraud through their transactions. Another major difference comes from their respective sources. Ongoing Monitoring takes its data from KYC, sanctions lists and adverse media, while Transaction Monitoring’s data comes from payments and behavior of the individuals. 

What Is the Ongoing Monitoring Process?

FATF Recommendations explains Ongoing Monitoring Process as a process that must continue throughout the entire duration of a business relationship. In this process, you are expected to regularly check and verify customer information to ensure that you are complying with regulatory requirements and detecting any suspicious or illegal activities.   

How to Build an Effective Ongoing Monitoring?

• The absolute first step you should take is understanding what your goals are. We are emphasizing the importance of this part because every industry has different critical areas to focus on. For example, banks often need to include money laundering activities. This way, you can properly specify your risk tiers and triggers based on these metrics as well. 

• Also according to your industry, you must regularly check the updates from relevant regulators. Its importance especially becomes apparent in highly regulated industries, such as finance and crypto. 

• We also recommend you to conduct reviews and risk assessments at least once a year. However, its frequency again depends on your industry. Therefore, do not hesitate to increase the frequency of these reviews based on your industry’s needs. Since your business is likely situated in a dynamic sector, a measure that works today doesn’t mean that it will work next month. This way, you will be able to reassess your strategies and vulnerabilities, then fix them accordingly.  

• Moreover, we cannot overstate the importance of documentation. You must keep a record of essentially everything related to your Ongoing Monitoring processes, which includes reviews, findings, actions, updates and more. These will become life-savers during future audits and investigations. 

• You can make all of these easier with the help of the technological tools and software that improve each day. These will not only help you to take care of each matter more efficiently but also ensure that you will be staying compliant altogether. For example, Sanction Scanner offers Automated Daily Ongoing Case Management that allows you to manage your scans, change the scanning period of a customer and view the results history. 

• While we have emphasized the importance of leveraging relevant technologies, you should not neglect the role of manpower. You must train all of your employees, not just the compliance teams because an effective Ongoing Monitoring framework requires everyone to act accordingly. Thus, communication and collaboration between all of your departments must be clear. In short, you should promote a culture of compliance within your organization. 

When is Ongoing Monitoring Necessary?

According to FATF and many other regulators, it should start the moment your business relationship starts due to the uncertain and dynamic landscape of AML.

Tools and Technologies for Ongoing Monitoring

Obviously, starting with Transaction Monitoring Systems will not come as a surprise, since these automate real-time or batch monitoring of customer transactions. Transaction Monitoring Systems can also benefit from your predefined rules to create more accurate alerts. These technologies even include features like scenario optimization, behavioral pattern recognition and alert prioritization models. 

As expected, transactions aren’t the only activities that you must watch for, which brings us to the Customer Screening and Watchlist Solutions. For example, Sanction Scanner offers automated daily Ongoing Monitoring checks against sanctions and watchlist data, PEP (Politically Exposed Person) data, and adverse media data. We have already mentioned the Automated Daily Ongoing Case Management. You can basically use it to centralize alerts, investigations and escalations. Moreover, they will provide audit trails for investigations and regulators. If you’re using our case management technology, you will see that AI generates profile summaries that explain the reason behind a match and what it represents. 

What Are the Challenges in Ongoing Monitoring?

In fact, the current nature of financial transactions is one of the major factors when it comes to challenges in Ongoing Monitoring. Since there are various regulatory environments, different standards and diverse laws, the obligated institutions have a harder time to keep up with everything. 

• One of the most common challenges you can come across during Ongoing Monitoring is an overload of false positives. It is not unseen to receive several alerts due to Sanctions and PEP screening, which may lead compliance teams to spend time investigating these instead of real risks. 
• Another scenario you could face is having difficulties when trying to integrate modern AML/KYC systems into your existing systems. Several banks and financial institutions are still relying on legacy banking systems that are not very compatible with modern solutions. This can lead to scattered information across departments, operational inefficiency and regulatory risk. 
• Another difficulty you may face can emerge from limited third-party sources, regional restrictions or outdated data. These insufficient data can cause significant gaps in risk detection, which may result in compliance failures. 
• Last but not least, you are probably aware that AML/CFT regulations constantly change across different jurisdictions. Sanctions lists get updated daily, both global and local regulators change their expectations continuously, which can lead to penalties, license restrictions or fines. 

Fortunately, at Sanction Scanner we address these problems with easy API integration, lists that get updated every 15 minutes, risk-based monitoring, case management and several other tools. 

What Are the Benefits of Strong Ongoing Monitoring?

One of the biggest advantages of Ongoing Monitoring is early risk detection. A risk detected early can prevent several things such as regulatory penalties, financial crime, reputational damage and loss of trust. Also, you can get customer behavior insight through tracking evolving customer patterns over time and adjusting the risk scoring accordingly. These automated processes such as screening, scoring and alerts, will reduce the workload of your compliance teams and save money. Another major advantage of Ongoing Monitoring is that it will ensure that you are ready for future audits by maintaining full records of alerts, investigations and other necessary documents. Last but not least, all of these will protect your reputation as a reliable and credible institution.

How Sanction Scanner Supports Ongoing Monitoring

At Sanction Scanner, we basically address every challenge and offer all of the technologies that we’ve listed above. We offer continuous screening of customers, counterparts and transactions against over 3000 sanctions lists, PEP databases and adverse media. Plus, we update these lists every 15 minutes. Simultaneously, our AI-powered tools generate auto-alerts when they detect a match or suspicious activity. Moreover, thanks to our risk-based rule engines, you can allocate your resources and compliance efforts on higher-risk cases. Last but not least, our software records all necessary documentation for future audits. These can also help you conduct internal reviews and thus, improve the monitoring process. This is only a part of what we provide, you can contact us to learn more.