Transaction Monitoring System

A comprehensive tool to monitor all transactions, ensuring risk-based business segments and thresholds are in place based on regulatory typology assessments. A well-defined Transaction Monitoring Program is an important component of an effective AML & CTF program. Monitoring refers to the monitoring of customer transactions, including assessing historical / current customer information and interactions to provide a complete picture of customer activity.

Weak or Poorly designed Transaction Monitoring System may lead the organization to Non-Compliance Charges from the regulators. LiveEx TMS provides a risk-based approach to monitoring the customer behavior and transactions. The LiveEx TMS system provides the flexibility to active and inactive the rules from menu driven user interface. The TMS System is configured with identifying of abnormal / unusual transactions, patterns of activities and behaviors of customers.

TMS - Solution

Transaction monitoring solutions enable financial establishments to watch their customer’s transactions in real time and/or on a daily basis. These solutions do not only view current transactions, but also analyze customers' historical information and account profiles. From there, an analysis of the customer can be provided, which can include risk levels and predicted future activity. This can include transfers, deposits, and withdrawals. Mostly all financial institutes will use software to automatically analyze this data.
You may have been on the receiving end of transaction monitoring before. Have you ever received a phone call from your bank asking you to confirm certain purchases? That is because, thanks to transaction monitoring, your bank has a general idea of your normal financial activity. If they notice unusual behavior, they can report it (such as suspected credit card theft), or to the authorities if they think its criminal activity.

Transaction Laundering?

Transaction laundering could be a newer sort of money crime which may be prevented by adequate transaction observance; however we’ll dive into that a touch later. Basically, transaction laundering happen once a criminal offers one thing dirty available on-line below the color of a legitimate and legal product. Criminal’s source measure believed to be wash billions of Dollars once a year through this technique.

As an example:

Let’s say a criminal using a web base selling Garments. However, the website is really just a cover-up as the criminal is actually selling illegal Drugs online on a separate website. To make the Drugs purchase appear legal, the illegal will route the payment through their lookalike legitimate Garments selling website. The transaction goes through smoothly, and the illegally laundered money credit into the criminals account, lookalike from a legal source.

Why is TMS important?

First, transaction monitoring is an important first step in any financial institution's AML and CTF procedures. Being able to spot suspicious transactions could potentially prevent thousands or millions of dollars from being laundered by criminals. No organization wants to be involved in a money laundering scandal. In addition, transaction monitoring gives regulators and banking partner’s confidence. This shows that financial institutions take AML and CTF regulations seriously and are doing everything possible to prevent criminal activity. This builds trust between new and/or existing partners. Transaction monitoring additionally permits financial establishments to take a risk-based approach. This means they are able to identify and manage potential risks for their clients. There are many factors that determine a client's level of risk, such as: B. Type of employment, country of residence, etc. Once a financial institution has determined a customer's risk level, it can adjust monitoring of that customer. For example, low-risk customers do now not require as much transaction monitoring as high-risk clients. Depending on where they are placed and the segments and merchandise they serve, some companies want to take a riskier method to all customers.

Financial Action Task Force (FATF) standards

As per the FATF, AML and CTF procedures and acknowledges the subsequent factors as determinants of the correct extent of AML/CTF controls:

The volume and size of transactions

The distribution channels that are used

The degrees of risk that are associated with each area of the financial institution’s operation

The extent to that the financial organization is dealing through intermediaries, third parties or non-face-to-face access (if applicable

The customer, product, and activity profiles of the financial institution

The nature, scale, and complexity of the business

The diversity of a financial institution’s operations, including where they operate geographically

Which is healthier – Automated - Controlled or Manual?

Across the board, automated -controlled group action watching is much superior to manual group action watching. It’s implausibly time intensive (and expensive) to undertake and plan to produce a manual group action news system. Humans even have a way larger capability to create errors than a chosen package can. However, there's still a manual facet to automatic dealing observation so as for it to be actually triple-crown. As an example, an observation package might flag a suspicious dealing for associate worker to appear at and verify if it's so suspicious. Real individual’s square measure required to confirm that package is functioning because it ought to be False positives are often a difficulty once victimization an automatic dealing watching answer. The software package must be capable enough to follow distinctive rules for various sorts of purchasers. If the foundations aren’t correct, then too several false positives can occur, which may produce a backlog of terribly tedious work for workers. A financial organization will like better to build their dealing watching software package in-house or hunt for a 3rd party answer. If developing an answer in-house, it's going to be necessary to usher in associate professional in compliance associated risk to form an economical program. Whatever you decide on, there square measure one or two of things to stay in mind. The flexibleness and measurability of an answer is of utmost importance, because the laws encompassing dealings observation square measure perpetually dynamical. In addition, it’s vital to be able to produce Associate in Nursing audit path of all activity to own a transparent understanding of what's happening, and to probably show to the relevant authorities.

[Central Bank of the UAE] TRANSACTION MONITORING AND SANCTIONS SCREENING

September 8, 2021
ANTI-MONEY LAUNDERING AND COMBATING THE FINANCING OF TERRORISM AND ILLEGAL ORGANISATIONS GUIDANCE FOR LICENSED FINANCIAL INSTITUTIONS ON TRANSACTION MONITORING AND SANCTIONS SCREENING.

Risk Assessment

Risk-Based Deployment of Transaction Monitoring Controls

Data Identification and Management

Rule Definition and Pre-Implementation Testing

Alert Scoring and Prioritization

Outcomes Analysis and Management Information Systems Reporting

Post-Implementation Testing, Tuning, and Validation

An effective TM program enables LFIs to detect, investigate, and report suspicious transactions, in compliance with the UAE’s legal and regulatory framework, and to ensure that the institutions’ customers and transactions remain within their risk appetite. Effective TM therefore depends critically on information obtained through the application of customer due diligence (“CDD”)/know your customer (“KYC”) measures, including but not limited to information regarding the types of transactions in which the customer would normally be expected to engage. Obtaining a sufficient understanding of its customers and the nature and purpose of the customer relationship, together with the ongoing analysis of actual customer behavior and the behavior of relevant peer groups, allows the LFI to develop a baseline of normal or expected activity for the customer, against which unusual or potentially suspicious transactions can be identified.
TM compliance personnel should escalate for priority remediation any identified omissions or inaccuracies in relevant customer or beneficial ownership information or gaps or data quality issues in required transaction or payment message fields. An effective TM program consists of the following core elements
A well-calibrated risk-based framework Robust training and risk awareness | Meaningful integration into the AML/CFT program | Active oversight | Risk ratings and scoring for watched transactions in real time with Dow Jones Risk and Compliance | Minimizing False-Positive" by APPLIED LEVENSHTEIN DISTANCE ALGO | Unique risk scoring for customers and accounts, as well as the transaction activity. | Evaluate of transactions using Machine-Learning Models to decrease false positives. | Management/Administration of Cases/Alerts and Rules/Scenarios. | Complete analysis showing why the alert was Popup. Monitoring customer behaviors. | Minimizing False Positives by tuning the rules and dynamic customer segmentation.