What Role Does Transaction Monitoring Have to Play in AML at Present?

In 2019, the global transaction monitoring was expected to grow to $16.79 billion by 2023 – many driving forces combined to play a role in this market surge. Digitalization is trusted upon to increase the financial transaction volume. But, the main threat is the growing risks of financial crimes, and the immediate ardent need to curb and evict the economic criminal activities advancements by means of regulatory compliance and advanced data analytics.

This huge surge calls forth transaction monitoring for the benefit of transaction monitoring. Thus, as a result, the financial institutions in Australia have to ensure process and tools optimization for detecting suspicious activities with greater efficiency and effectiveness.

So What Is Meant by Transaction Monitoring? Why Is It necessary?

Transaction Monitoring means monitoring the customer’s financial transactions comprising of assessing the past as well as the present customer information, and the relevant interactions in order to provide a complete picture of the customers’ activities.
The Australian firms have to monitor the transactions to meet the laws and regulations along with the industry guidance. The firms specifically should look out for exceptionally complicated and large transactions and figures to determine whether the activity is rightly adjacent to their knowledge about their customers. The transactions contradicting their knowledge about both the purpose and nature of customer relationship has to be escalated to be investigated further – although in some cases, interacting with the customers lead to lessen all such concerns.

The need to monitor as well as report the suspicious transaction is in practice for about 29 years, since the implementation of the first AML directive. In the early days, the transaction monitoring approach was manual integration for every transaction done by a customer. Once completed with satisfaction, then it would be approved. Transaction monitoring in theory still remains the same – it is the most effective method, though time-consuming in relation to the huge volume and velocity of the customer transactions, and the necessary resources needed for reviewing this. So, taking help from the AML professionals for transaction monitoring is essential to make sure the process goes on legally and with perfection.

What are the Uses of Automated Transaction Monitoring Systems?

In the present scenario, advanced transaction monitoring software aids the financial service agencies in efficient data analysis and automatic identification of unusual behavior patterns. Hence, the firms can focus on solving the anomalous transactions and high risks. Hence, what are the available options for transaction monitoring models and how a firm chooses the right one?

The Transaction Monitoring Models

Several transaction monitoring systems exist in the market for resolving the issues. To highlight their functionalities, these systems provide:

• Integrating seamlessly with the existing datasets
• Making an intelligent approach to the datasets by means of the feedback along with the fine-tuned transaction monitoring rules calibration
• Real-time and retrospective analysis

Conversely, there is the option to build up a bespoke model for addressing the particular concerns of the firms. The common thing in all the products is the seamless experience promise. So, from where are the issues arising from when the promise is the same for all?

The Zones From Where the Issues Are Arising

Thematically, making an approach to transaction monitoring is viewed by following the external audit and a few investigation forms by the regulators. So, as a result of irregular transaction monitoring, bring up three chief issues arising within the firms:

• One size fitting all
• A lot of false positives 
• A number of scenarios and rules
• One Size Fitting All:

The very first issue is totally self-explanatory and it is the original defect related to the out of shelf products. None can ever have expectations for a merchant acquirer with a small but dedicated client base belonging to the corporate entities to be experienced as a start-up firm offering suitable competitive exchange rates. The models of transaction monitoring are dependent on the data manipulation, and the manipulation is possible when the applied rules are capable to produce a productive count of alerts.

• A Lot of False Positives:

The transaction monitoring software highlights many cases, which do not warrant any review that in turn inflates the operation costs, creates a great backlog and risks causing a delay to the legal cases under investigation.

• A Number of Scenarios and Rules

This issue is in close correlation to the false-positive cases. As the present transaction monitoring software system is generating a large count of false positives, causing a new set of rules incorporation and developing the present modified rules, then the system is sure to result in a lesser number of false positives. With the rules becoming more complicated, harder is it to extract the necessary information about the business.

In the end, bespoke and in-house solutions even present issues. First of all, the prime issue is the cost, and the second is the in-house solutions in need of training and professional maintenance. Different from the out of shelf products, customer services are not available.

We shall end the discussion answering the question “do the approaches to transaction monitoring need to be reviewed?”. Well, the business firms must consider reviewing their holistic approach to the transaction monitoring for reducing the costs and increasing the effectiveness. The three issues discussed right above need patience, focus, and a clear working plan. Only an evolving plan on continuous improvement will help the firms to ensure they are controlling their transaction monitoring accordingly.

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