Transaction Monitoring in Money Laundering

Top 5 Ways to Enhance Transaction Monitoring in Money Laundering

The fintech industry has experienced exponential growth to facilitate users during payment transfers and more further. According to Statista, the financial revenue of fintech will grow to around 188 billion pounds by 2024. The figure highlights the importance of applying transaction monitoring in money laundering . This way, business experts can easily ensure compliance with KYC & AML regulations to avoid hefty fines and permanent bans. In this way, fintech experts can provide a positive experience for users and boost yearly profit rates. 

The following headings in the article discuss a brief overview of KYT services, procedures and five ways to improve transaction monitoring in money laundering. 

Transaction Monitoring in the Fintech Sector: A Brief Overview

KYT is about observing clients’ monetary exchanges in real-time. This comprises purchases, financial deposits, transfers and withdrawals. It is typically associated with customers’ historical data to create a complete picture of users’ activities. 

Transaction monitoring in money laundering facilitates the fintech sector in making predictions and mitigating risks. This way, businesses can curb scams, terrorism financing and other financial crimes effectively. 

According to Mordor Intelligence, the transaction monitoring market size will show a CAGR of 14.5% from 2021 to 2026. 

In the modern world, transaction monitoring and assessment are significant to fulfil AML and CFT regulatory obligations. 

Working of Transaction Monitoring in Money Laundering in the Fintech Sector

The manual transaction monitoring solutions are time-consuming and resource-draining. This is where the application of AI-driven KYT systems plays an important role while increasing the efficiency of the process. The automated approach can review all transactions, offer scalability and a feasible approach. 

Transaction monitoring in money laundering can identify suspicious activities with high accuracy. This not only reduces human error but also facilitates the examination of abnormalities. 

Applying transaction monitoring in money laundering can help experts detect red flags such as bribery, corruption, ID theft and terrorism financing. After identifying abnormalities, the automated technology alerts the compliance officers to conduct a follow-up assessment. 

Determinants of AML/CFT Controls: Gaining Insight

For financial firms, it is mandatory to follow all local and international regulations. FINRA has published its report on investigation and risk mitigation programs. FATF has introduced some standards such as AML & CFT guidelines. It identifies the following factors as decisive in AML/CFT controls: 

  1. How diverse are the business operations in the fintech sector?
  2. What is the size, type and complexity of a firm?
  3. How does the financial sector deal with intermediaries and third parties?
  4. What is the main distribution channel?
  5. What are the size and volumes of monetary exchanges in the industry?
  6. How much risk is associated with every area of the fintech industry?
  7. What kind of clients, products and business activities are there in fintech?

Top 5 Tips to Enhance Transaction Monitoring in Money Laundering

The fintech sector must implement an AML transaction monitoring system to discourage criminal activity. Any customer who is associated with a Politically Exposed Person (PEP) faces serious legal penalties. 

To ensure a positive experience and stay one step ahead of the competition, applying transaction monitoring in money laundering is essential. The following points can help corporations hit targets through updated transaction monitoring services. 

1. Understanding Customer Risk Factors

There are various risk levels associated with each customer’s profile. It is influenced by various historical and current factors such as location & industry. Hence, it is important to comprehend users’ risk factors to deal with financial crimes successfully. 

2. Creating Rules for All Types of Risk 

The fintech sector must define all the rules for every risk category (low, medium, and high). This is important to avoid financial scams and also non-compliance penalties. The big tip is to design laws that are customisable and dynamic in nature. 

3. Setting Up Fraud Alerts

In case of AML rule violation, there should be an alert to notify the compliance officers. The purpose is to help authorities evaluate suspicious activities and upgrade security measures. 

4. Notifying Compliance Teams

When authorities receive the notification, there should be no transaction until & unless compliance officers have thoroughly examined the risk. 

5. Producing a SAR

In case of any suspicious activities, producing a Suspicious Activity Report (SAR) is critical. It should be sent to the Financial Intelligence Unit (FIU). It is cumbersome and time-consuming, but transaction monitoring in money laundering can automate it. 

The Bottom Line

Companies that are still operating on old transaction monitoring systems, face the risk of money laundering and terrorism financing cases.  In the context of the current regulatory landscape, the application of transaction monitoring in money laundering is vital. 

Corporations can collaborate with a third-party vendor and implement a GDPR-compliant solution which facilitates compliance with AML regulations. This way, companies can secure a strategic advantage and attract genuine customers worldwide.


Your email address will not be published. Required fields are marked *