Money laundering is disturbingly increasing because criminals effectively go about their business without being considerably disturbed. Regulators and authorities are responsible to prevent these actions across all sectors and their members (Financial Institutions, Law Firms and Auditing Offices)
In an attempt to redefine and evaluate procedures that will protect and prevent from money laundering, it is inevitable to apply and use Transaction Monitoring. Implementing Transaction Monitoring processes should not be limited to the initial stages of establishing a business relationship with the client but throughout the lifespan relationship with the client. Similarly, transaction monitoring should involve new and existing customers, and the Due Diligence process for both categories of customers.
A Transaction Monitoring solution should provide an organization with the ability to track large volume of transactions, as well as recognizing suspicious patterns that will assist with pinpointing any illegal business traffic. Acquiring such a solution is challenging, and the right expertise and experience is required from the vendor to make sure the business is safeguarded by monitoring risk, tick-off all the regulations and keep any partner happy.
Below we mention the key challenges that one organization will need to consider prior to moving forward with acquisition and adaptation to a Transaction Monitoring solution:
- Case Management
A Transaction monitoring solution to be comprehensive it ought to be able to manage cases individually by generating alerts. The case management feature should also have the possibility to investigate each case separately, assign criticality / priority and mitigation actions, track the status, but also to able to delegate it.
- Rule Management
From our experience having too many rules does not necessarily mean better. Instead, we propose having a rule that is flexible and that can relate to real-life scenarios, but also manage and tweak around as each company is different. Within this Transaction Monitoring Rule framework, a system should support creation of predefined rules regarding cases of valid AML flags/alerts, allowing for both real-time monitoring and the fine-tuning needed to cover unforeseen requirements.
- False Positives
Preset rules are great, but can never be accurate. This will result to a generation of high volume of positives, and this increases the workload of tiresome work for compliance officers. Applying predictive analytic methods - such as Machine Learning and/or Artificial Intelligence - will eliminate the occurrence of false positives, and consequently increase the results accuracy.
For any organization it is vital to obtain and extract any sort of helpful information. Establish beforehand just how your transactions will be monitored, analyzed, managed and completed. This will enable you to determine what data is important to your organization. All this intelligence the software solution should analyze and present at any way that fits best for your organization. I.e. Excel file export, or a graphical visualization within the solution itself. This will benefit you from acquiring additional services of a 3rd party vendor.
Organizations such as the Financial Action Task Force (FATF), the EU’s 4th Money Laundering Directive and more, suggest that a comprehensive AML program should operate using a risk-based approach. Firms should create and consistently updating a risk profile for each of their client, including transactions and source of funds. The personal and business risks that come along with this are too high, thus a solution should continuously identify all forms of risk which may be embedded in the organisation’s structures, processes, systems, and data, and which may be causing business hazards.
- Cost & Future Proofing
Can the software solution keep up the pace and vision of my firm? That’s a question of the up most importance. Remember that regulations change. New guidelines are put in place - a great example is the EU’s AML Directives. Or, new products are offered by a company. A software solution should be able to accommodate any sort of change that might come along the way to ensure that business requirements changes can be implemented at low cost. Then, are there any support or maintenance costs (to name a few) that need to be taken into consideration? Assign KPIs that can guarantee performance monitoring.