Transaction monitoring has always formed a key part of AML and financial crime compliance, however this has ramped up to 100 in the digital age.
With more eyes on transactions than ever before, the rise of post-event transaction monitoring should only seem normal. While transactions in real-time and post-event has always been in existence, in a time where transactions have become more complex than previous, the need to have a heightened focus on post-event transactions becomes imperative.
In a recent post by Sentinels, the company offered a detailed explanation of post-event transaction monitoring and its role in modern payments.
According to Sentinels, post-event transaction monitoring involves periodic (often weekly or monthly) reviews and is used in less critical situations where, while payments may not raise an alarm immediately, over time patterns may arise that point to unusual activities. With post-event transaction monitoring, completed payments are usually compared against money laundering typologies to uncover hidden patterns for further investigation.
How is this form of transaction monitoring carried out? For the most part, modern-day post-event transaction monitoring makes use of software tools for automated monitoring and accompanying rules that are designed to examine customer activity on a profile basis and alert compliance teams with high confidence when something is amiss.
This, Sentinels claims, enables compliance experts to manually look into potential instances of money laundering and other financial crime.
Sentinels added that before defining their own rules, they should consider a number of factors. These include ensuring that rules should be clearly defined so false positives don’t occur. In addition, compliance teams should be consulted before defining any rules, as they are the most likely to know the most about a firm’s customer profiles than any other team.
Companies should also add a robust AML and transaction monitoring tool to their tech stack which should ideally enable automated monitoring, help you to predict threats and allow you to easily build and deploy your own rules.
Defining business rules for transaction monitoring should also take a number of key factors into consideration. These include the type of customer, segmented customer target groups, customer risk profiles created during due diligence, transaction country of origin, product, distribution channels, nature and frequency of transactions, unusual transaction value and previously dormant accounts.
Why is post-event transaction monitoring important? Sentinels detailed that all financial firms need to be carrying out post-event transaction monitoring as part of a wider real-time transaction monitoring process – its not only good practice but it is also required by many European and national regulations.
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