ByIn 2023, Ghana’s risk index for money laundering and terrorist financing measured at 5.29, slightly lower than the previous year. This assessment considers various factors like legal frameworks and financial governance. Ghana’s progress is evident as it ranked 43rd among 128 countries, a notable improvement from its 2012 position at 53rd, indicating higher risk back then.
These shifts emphasize the nation’s dedication to strengthening anti-money laundering (AML) efforts, mainly through effective financial transaction monitoring. These monitoring procedures assist in fortifying the banking and other related financial institutions for enhanced integrity. Therefore, these AML measures are integrated with these scrutiny processes so that enterprises can streamline their operations in this chaotic world of huge monetary losses and crimes.
What is Financial Transaction Monitoring?
Financial transaction monitoring involves the steps through which banks and other fiscal entities consistently examine the users to identify any possible high-risk transactions. A KYT (know your transaction) solution provider for detecting the major inconsistencies and anomalies within funds transfer histories plays an important role and assists in maintaining the reliability of financial institutions.
KYT solution providers scrutinize the complete background activities of the potential user’s profiles to find the exact risk score associated with the profiles and then forecast future transactional doings. Financial transaction monitoring conducts operative measures and creates SARs (Suspicious Activity Reports) according to the customer’s action and directs to the relevant authorities for conducting further investigation to find the actual cause of its execution.
A Complete Gateway of Transaction Processing System – Fortifying Financial Departments
Transaction processing system (TMS) is designed based on the risk-based AML regulatory measures. TMS for business transaction monitoring enables the strategist to track and evaluate the customer’s credit card history and other related factors in real-time. For this purpose, the credentials acquired for KYC procedures to be utilized for TMS assist in better comprehension of risk associated with customers’ profiles. There are the following steps involved in the complete execution of financial transaction monitoring:
- The process starts with the identification of suspicious behavior within a financial transaction. There are defined parameters for identifying suspicious behavior, which include high-frequency transactions, varied geospatial locations, and irregular funds transfer amounts. Financial transaction monitoring adapts emerging risks to identify variations in regulatory sanctions.
- Setting alerts for fortifying the financial excellence in AML transaction monitoring includes generating automated notifications according to some defined frameworks. These alert notifications can be designed and customized according to the requirements of each financial institution and involve the high-risk users, money laundering propagandas and unusual funds transfer.
- The next step in the process is customer identification. This means checking and confirming customer information like names, addresses, and ID documents. The SEA Rule 17a-3(a)(17) requires broker-dealers to keep detailed records of all securities trades. Customer identification is crucial for monitoring transactions and spotting suspicious activity.
- Transaction analysis is the fourth step within finance monitoring, which assists in identifying the user’s transaction details such as geospatial location, origin, and the funds amount. Financial transaction analysis for the payment screening process assists in detecting potential illegalities and finding out about terror funding and money laundering crimes.
- One of the ending steps involves the reporting (SARs) of the illegal transactions to the relevant authorized departments. Financial institutes lacking transaction monitoring systems can face severe penalties and also result in reputational damage.
- In the final step of review and audits, it is ensured to be always aligned with the updated credentials of the systems. Transaction monitoring software should be on the same page with the latest parameters that can assist in examining any false positives or negatives to detect the areas for improvement.
The Necessity of Transaction Monitoring for AML Regulatory Conformity
Financial transaction monitoring is a mandate that should be regulated in any enterprise other than fiscal entities. Bank transaction monitoring leads to streamlining the financial activities in the system and meeting all the regulatory requirements proposed by AML compliance. Complying with AML rules assists in mitigating the potential threats of terror funding and money laundering. A comprehensive AML compliance infrastructure integrates all data, including customer attributes, into a single workflow and system. This unified platform covers client screening, payment screening, and transaction monitoring. It optimizes AML compliance by incorporating best practices, including leveraging artificial intelligence for enhanced capabilities.
The Bottom Line
As the business operations are directed, their working mechanisms towards the digital platforms are increasing, and the monetary losses through financial frauds are increasing. In this chaotic situation, monitoring the customer’s financial transactions before onboarding or giving their services has become critical. The monitored users or customers do not get involved in illegalities due to the danger of not getting reports to authorized departments. The integration of financial transaction monitoring has revolutionized almost every organization by combating the threats of terror funding and money laundering.
