3 Reasons Why Your Bank Needs a Complete Transaction Monitoring System

Few industries in the world are quite as highly regulated and monitored as financial services, and for good reason. It is especially vulnerable to crime and corruption, with trillions of dollars laundered through legitimate financial markets each year.

Indeed, perpetrators of financial crime are only becoming more aggressive, leveraging technology and using increasingly sophisticated methods to defraud banks and other financial institutions. Unfortunately, many of these crimes go undetected. Fewer than one percent of criminal funds that are flowing through the international financial system annually are found, frozen, and seized by law enforcement officials. 

To maintain client trust, avoid damaging their market share, and preserve their reputations, it’s on banks to keep themselves from falling prey to financial abuse and becoming an unwitting party to illicit activities. That said, a state-of-the-art complete transaction monitoring system can help these financial institutions stop money laundering and terrorist financing activities in their tracks while staying a step ahead of malicious actors. Here are a few of the benefits of employing one such system for your enterprise:

Ensures Compliance with All Existing and Emerging Anti-Money Laundering Regulations

Anti-Money Laundering

Anti-money laundering is an umbrella term for all laws, regulations, and procedures meant to deter criminals from masking funds obtained through illegal means and presenting them as legitimate income. In general, they cover rules and requirements to ensure that financial institutions that accept deposits from and offer lines of credit to their clients are not aiding in any money laundering efforts.

These regulations can vary from country to country, and they target a wide variety of criminal activities as well as the methods used to cover up them up. Examples include the corruption in public finance, market manipulation, tax evasion, and illicit trade, among others.

Failure to comply with anti-money laundering laws and regulations can have serious consequences for a financial institution, including hefty punitive fines, sanctions, and reputational damage. Additionally, the financial institution in question may be subject to criminal proceedings as a result of non-compliance.

Anti-money laundering regulations are always changing and evolving to keep up with new and emerging threats. Thus, the importance of employing a comprehensive AML transaction monitoring system cannot be understated. When equipped with an updated library of pre-configured and industry-recognized anti-money laundering scenarios, financial institutions and other businesses can quickly comply with all current regulatory requirements, both local and multinational. Such a system can also future-proof the financial institution, enabling them to dynamically react to new regulations without causing too many disruptions to day-to-day business activities. 

Helps Financial Institutions Obtain an In-Depth, 360-Degree View of Financial Activity and Customer Risk

Financial Activity

In the digital age, information is king. The more data a financial institution can collect on its customers, the better. Thus, a complete transaction monitoring system can give stakeholders and regulators a comprehensive look at the financial activities of any of a financial institution’s customers. When combined with other anti-money laundering products such as customer due diligence and investigations software, it can also bring to light any risks that said activities or customers may pose to the enterprise. With this information, potential money laundering behaviors can be easily detected and promptly investigated. 

Such an application should be able to identify potential perpetrators of financial crime using risk scoring models and risk derivation. Additionally, it will give financial institutions the power to see the risks associated with the people and places that their customers are doing business with. Finally, such a system will not only be able to constantly monitor customer activity, but also leverage, search, store, and analyze all data collected on that customer. This can then be used to uncover new correlations, relationships, and trends, ensuring holistic surveillance. 

Reduces the Number of False Positives Associated with Traditional Transaction Monitoring Methods

 Reasons Why Your Bank Needs a Complete Transaction Monitoring System

Digitization and automation instantly solve one of the major issues associated with traditional transaction monitoring methods: the generation of a high number of false positives. In traditional rules-based transaction monitoring, the system makes use of pre-determined rules, but they are often applied overly simplistically. Should a customer action break one of these rules, the system immediately flags the transaction in question. This generates a massive number of cases and high levels of false positives that will have to be attended to by a human investigator. With an intelligent transaction monitoring system that makes use of machine learning and algorithmic models to score events accurately, such incidences can be greatly reduced.

A complete transaction monitoring system empowers your financial institution with intelligent features that can be a boon to your business. In addition to enabling your enterprise to stay compliant with AML laws and regulations, a modernized system should be able to make meaningful use of both structured and unstructured data from your customers, allowing you to serve them better. Finally, it will help reduce investigator fatigue that could lead to human error when looking into red flags.

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