Top 5 Ways to Enhance Transaction Monitoring Process in Business Operations

The FinTech industry has experienced exponential growth to facilitate users during payment transfers and more. According to Statista, the financial revenue of FinTech will grow to around 188 billion pounds by 2024. The figure highlights the importance of applying transaction monitoring processes in business financial dealings. This way, business experts can easily ensure compliance with KYC and AML regulations to avoid hefty fines and permanent bans. In this way, FinTech experts can provide a positive experience for users and boost yearly profit rates.

Let’s briefly overview KYT services, procedures and five ways to improve transaction monitoring in money laundering.

Transaction Monitoring in the Fintech Sector: A Brief Overview

KYT is about observing clients’ monetary exchanges in real time. This entails spending money through deposits, transfers, purchases, and withdrawals. It is typically associated with customers’ historical data to create a complete picture of users’ activities.

High-risk transaction monitoring facilitates the fintech sector in making predictions and mitigating risks. This way, businesses can curb scams, terrorism financing and other financial crimes effectively. In the modern world, transaction monitoring and assessment are significant to fulfil AML and CFT regulatory obligations.

Working of Transaction Monitoring Solutions in the Fintech Sector

The manual transaction monitoring solutions are time-consuming and resource-draining. This is where the application of AI-driven KYT systems plays an important role whilst increasing the efficiency of the process. The automated approach can review all transactions and offer scalability and a feasible approach.

The monitoring of financial transactions to detect money laundering is highly accurate. As a result, there is less chance of error during inspections of irregularities.

Real-time transaction monitoring can help experts detect red flags such as bribery, corruption, ID theft and terrorism financing. After identifying abnormalities, the automated technology alerts the compliance officers to conduct a follow-up assessment.

Determinants of AML/CFT Controls – Gaining Insight

For financial firms, it is mandatory to follow all local and international regulations. FINRA has published its report on the investigation and risk mitigation programs. FATF has introduced some standards, such as AML & CFT guidelines. It identifies the following factors as decisive in AML/CFT controls:

1. How diverse are the business operations in the FinTech sector?
2. What is the size, type and complexity of a firm?
3. How does the financial sector deal with intermediaries and third parties?
4. What is the main distribution channel?
5. What are the size and volumes of monetary exchanges in the industry?
6. How much risk is associated with every area of the FinTech industry?
7. What kind of clients, products and business activities are there in FinTech?

How to Enhance Transaction Monitoring Process in Business Operations

To deter illicit actions, the fintech industry needs a system to monitor transactions for signs of money laundering and terrorist financing. Any customer associated with a Politically Exposed Person (PEP) faces serious legal penalties.

Applying transaction monitoring in financial dealings is essential to ensure a positive experience and stay one step ahead of the competition. The following points can help corporations hit targets through updated transaction monitoring services.

1. Understanding Customer Risk Factors

There are various risk levels associated with each customer’s profile. It is influenced by various historical and current factors such as location & industry. Hence, it is important to comprehend users’ risk factors to deal with financial crimes successfully.

2. Creating Rules for All Types of Risk

The FinTech sector must define all the rules for every risk category (low, medium, and high). This is important to avoid financial scams and also non-compliance penalties. The big tip is to design laws that are customisable and dynamic.

3. Setting Up Fraud Alerts

In case of AML rule violation, there should be an alert to notify the compliance officers. The purpose is to help authorities evaluate suspicious activities and upgrade security measures.

4. Notifying Compliance Teams

When authorities receive the notification, there should be a transaction once & unless compliance officers have thoroughly examined the risk.

5. Producing a SAR

Producing a Suspicious Activity Report (SAR) is critical in suspicious activities. It should be sent to the Financial Intelligence Unit (FIU). It is cumbersome and time-consuming, but transaction monitoring in money laundering can automate it.

The Bottom Line

When it comes to money laundering and terrorism financing, businesses still using antiquated transaction monitoring systems are at risk. Moreover, transaction monitoring in anti-money laundering is crucial in the present regulatory environment.

Corporations can collaborate with a third-party vendor and implement a GDPR-compliant solution that facilitates AML regulations compliance. This way, companies can secure a strategic advantage and attract genuine customers worldwide.