Transaction Monitoring is a software that helps financial institutions monitor customer’s account transactions constantly.

What does Transaction Monitoring do? 

Transaction Monitoring fights financial crimes such as money laundering in financial institutions. Transaction monitoring software helps companies comply with AML / CFT regulations by monitoring client accounts to report suspicious transactions.

What are transaction monitoring applications?

Transaction monitoring detects financial crimes including money laundering, terrorism financing, fraud, drug trafficking, bribery, corruption, and identity theft. Advances in technology have significantly expanded the scope of financial transactions and transaction monitoring.

For the recent years, electronic payments have gained more interest than cash payments in retail industry. Because electronic payments save time and allow the transaction to be executed quickly. But in return, it requires more effort to control and analyze electronic fund transactions and cross-border payments by compliance officers. For this reason, it is very important to have a transaction monitoring compatibility technology to conduct compliance.

The increase in electronic fund transactions with the age of the Internet provokes new methods of money laundering for financial criminals. Transaction monitoring plays an important role in detecting increasingly complex financial crimes by analyzing suspicious activities in regard to all transactions.

Banks, Fintechs and other FIs are obliged to comply with AML Compliance regulations therefore with an effective transaction monitoring software FIs can save time and gain operational efficiency considering the immense effort required for analyzing each transaction of customers with manual human workforce. Without a doubt, poor monitoring may cause destructive consequences for banks, FinTechs and FIs when financial transactions are not properly monitored. Numerous money laundering scandals that companies are subjected to are costing them besides loss of reliability. That’s why companies are increasingly aware of the need for effective Transaction Monitoring.

Banks and other FIs have very valuable and extremely important financial data about their customers such as account movements, regular income, savings trend, and spending habits. All these ever increasing excessive data may cause false positives during Transaction Monitoring process. AI and Machine Learning technologies increase use of transaction monitoring applications by relying on more data and reducing false positives evidently. Therefore Transaction Monitoring software applications are expected to increase transparency and strengthen innovation in banking and financial services.

What is the transaction monitoring process in banks and fintechs? 

Banking is the core element in financial industry that billions of people, corporates, institutions and governments rely on to make necessary financial transaction safely. As a result, banks transfer millions of monetary funds every day, therefore they need to check every single transaction to ensure consistency of compliance, and to report suspicious transactions to prevent money laundering or combat terrorism financing. According to FATF regulations, banks should adopt an AML / CTF risk-based approach within the institution. In order to minimize the risks of banks, AML / CTF compatibility must be ensured. At this point, banks have some obligations to fulfill which can be summarized as followed:

• Getting to know customers and opening accounts based on sanction lists is not enough to prevent risk. Customers who are not included in the sanction lists also have a financial crime risk. Banks also must monitor all of the transactions and financial activity to minimize the risk. Banks can monitor transactions by placing rule sets for each customer compatible with their risk score and using AML Transaction Monitoring software, which alerts them when rule violations occur.
• Banks and other financial institutions Anti Money Laundering Compliance units are obliged to prepare a suspicious activity report (SAR) and submit it to financial authorities in the detection of possible money laundering. SAR presentation should be clear.

Why Suspicious Activity Report SAR is important?

 Suspicious Activity Report (SAR) has an important place in the anti-money laundering transaction monitoring software. Transaction Monitoring software application generates an alert for suspicious activity and reports them automatically. This process is reviewed in detail by AML Compliance and Risk Departments of the banks, FinTechs or other FIs. At this point, if SAR steps in and detects a financial crime in the customer transaction, suspicious transaction is required to be reported to Regulatory Authorities of the AML/CTF.

How to detect abnormalities in transaction monitoring?

The methods of financial crimes have begun to change with technology. Most financial crimes occur through leaks in the financial system. Criminals detect gaps in financial eco-system and commit crimes such as money laundering and terrorism financing.

Financial institutions cannot prevent these financial crimes with manual intervention by conventional monitoring and analyzing of each transaction and account activity. With AML Transaction Monitoring software, banks and other FIs automatically and more efficiently monitor their customers’ transactions such as deposits, withdrawals, local and cross-border money transfers. Banks and other FIs can also present this data as evidence during the Compliance audits.