What is AML Transaction Monitoring?

Transaction Monitoring system (TMS) is an integral part of an efficient anti money-laundering solution. Monitoring financial transactions help detect anomalies and mitigate fraud risks.

The main purpose of the AML transaction monitoring platform is to detect frauds, protect the banks from any illegal transactions or illicit transactions dealing in money laundering and terrorist financing.

Transaction Monitoring is very important in the banking sector due to new ways of fraud introduced in the market with evolved technology these days. TMS can be defined as a formal process for identifying anomalies with a method of monitoring such anomalies then raising alerts and filing SARs if required.

On a daily basis, customers’ financial transactions are monitored, assessed, and analyzed including customers’ historical financial transaction data like withdrawals, deposits, cash transfer, online transactions, investments, etc. TMS has a significant impact in reducing false positives, helps in the analysis of high-risk profiling, and improves operational efficiency.

A well-designed and structured TMS system is a crucial component of a robust AML compliance program. It helps in combating and preventing money laundering and terrorist financing activities, ensuring compliance and managing customer data.

AML Transaction Monitoring System

Let’s understand the AML-Transaction Monitoring Process:
  • Firstly, it monitors each customer’s financial transactions utilizing all contextual data spanned across all channels.
  • Secondly, it detects and raises alerts for any suspicious activities.
  • Thirdly such alerts or cases are assigned to the investigation team who review and scrutinize if these activities are genuinely unusual or not, if activities are found suspicious then such activities are escalated, and suspicious activities reports (SAR) are filed or flagged.
  • Lastly, it creates risk-scoring model management for transactions using rules, ML, and statistical algorithms.

What is SAR?

SAR is Suspicious Activity Reporting. If any alerts are triggered for anomalies, the case is reviewed by the investigation team, and if found suspicious, SAR is raised. SAR filings are based on many criteria such as client type, demographics, ownership, enterprises, and other customer factors.

To conclude, the Transaction Monitoring System is the backbone of the AML process which helps in identifying fraudulent activities and mitigating fraudulent risks.