Money laundering is a serious issue in numerous industries. Therefore, all organizations need to keep up with the latest AML rules, software programs, and procedures to reduce their chances of being used in money laundering activities. That is where transaction monitoring is important. Transaction monitoring is one of the cornerstones of a strong AML program. Therefore, all organizations need to understand what transaction monitoring is, how it is instituted, and how it can be used properly.
An Overview of AML Transaction Monitoring
AML transaction monitoring software programs allow financial institutions, including banks and credit unions, to keep an eye on the transactions of their customers on a daily basis. These programs are designed to be used in real-time. This information is combined with an analysis of the historical information of a customer. Then, the software program is able to provide financial institutions with a broad analysis of a customer’s profile. Furthermore, this software program is also designed to predict the future activity of a specific customer. That way, if there is a transaction that is out of line, it can be scrutinized appropriately, keeping an eye on wire transfers, withdrawals, and cash deposits.
In addition, AML transaction monitoring solutions will also include customer profiling features, blacklist screening, and sanctions screening. That way, companies will also know their customers a little bit better and will be able to keep an eye on those who might engage in money laundering.
What Are the Advantages of Using AML Transaction Monitoring Programs?
There are several advantages that Financial organizations will enjoy if they institute transaction monitoring programs appropriately. Some of the biggest advantages include:
- Detect Suspicious Behavior: One of the biggest advantages of this program is that it will help financial organizations detect suspicious behavior. If one of their customers makes a transaction that is out of their normal pattern or routine, the transaction monitoring program will alert the bank so that it can be investigated.
- Automation: These programs can also automate a lot of activities that used to take place by hand. This frees up the time of employees and managers to focus on other tasks without sacrificing the supervision that is required to adequately institute an AML program.
- The Program Gets Better with Time: Gradually, the transaction monitoring program is going to acquire more information to monitor. This allows it to improve its level of analysis, making more accurate predictions over time.
- Confidence: Financial organizations can rest easy, knowing they have a strong AML program in place that will audit customers on a regular basis to look for signs of illegal activity.
- Ease of Use: These programs are intuitive to install, very secure, and easy-to-use.
These are just a few of the biggest benefits of using a strong AML transaction monitoring program.
A Transaction Monitoring Program Is a Risk-Based Approach
At its core, AML transaction monitoring is a risk-based approach. The program is designed to identify customers who are engaging in financial patterns that are outside of their normal routine. Then, customers are assigned a specific level of risk when it comes to engaging in money laundering.
It is also important for financial organizations to implement a risk-based approach from top to bottom. All organizations have to take appropriate steps to identify the rest of the money laundering. Some of the factors that play a role in implementing a strong AML transaction monitoring program include:
- Adequately covering the diversity of the financial organization’s transactions
- Covering the nature, scale, and complexity of the financial institution’s business
- Monitoring all distribution channels used
- Customer profile of the financial organization
- Assigning an individual degree of risk to every business vertical of the financial organization
When financial organizations are able to address all of these factors, they will be able to institute a strong AML transaction monitoring program. It is also important for financial companies to audit their transaction monitoring program on a regular basis. As their business activities grow and change, it might be necessary to upgrade, change, or scale up the transaction monitoring program in order to adequately defend against potential money-laundering activities. All of this is important for creating a safe, healthy economic environment for everyone across the world.