Advances in technology such as intelligent transaction monitoring platforms have allowed anti-money laundering (AML) and Counter Financing of Terrorism (CFT) checks to be performed in real time, with under 100 milliseconds response times. Here are five ways to make AML more effective.
What is real-time transaction monitoring?
AML transaction monitoring service providers that take a real-time API-first approach can receive, store, and analyze transactions from the moment they are triggered. By combining this with the latest cloud-native statistics and search technology, these systems can also check transactions against active AML and CFT logic and generate alerts instantly. This in turn allows the company’s compliance analysts to assess the threat as it happens and take immediate action where necessary.
In contrast, organizations only taking a post-transactional approach, with no plans to incorporate a real-time tactical response, will collect and process transaction data in batch, typically the day after it has occurred. The opportunity to prevent potentially illicit activity is lost because the transaction will already have been processed.
5 ways to make AML more effective
1. Block transactions before the partner bank has processed payments.
AML systems draw on large volumes of data and different information sources to provide valuable insights to compliance teams. This intelligence becomes even more valuable when it is timely. With compliance analysts immediately alerted to high-risk transactions, action can be taken before the payment is processed. The less the partner bank has to be notified for transactions to be rolled back, the stronger the relationship becomes.
2. Quickly alert authorities
Real-time monitoring is particularly beneficial for organizations that have large daily transactions numbers. Receiving alerts post-event and in bulk causes a twofold delay in filing suspicious activity reports to the relevant financial intelligence unit. Flagging potential risk in real time allows any suspicious activity to be immediately reported.
Aside from meeting regulatory reporting obligations, alerting authorities at the earliest opportunity can help prevent further criminal activity, benefitting the wider financial community. In light of recent domestic terrorist attacks, several countries are beginning to adopt national security risk measures in order to catch the perpetrators as quickly as possible. This cooperation works in thwarting terrorist attacks only if information is rapidly discovered and immediately shared with Law Enforcement.
3. Reduce operational strain
With alerts assessed throughout the day instead of in bulk, compliance operations are more manageable. Of course, that is not to overlook the need for analysts to be more readily available to manage alerts but AML solutions that enable effective monitoring and management throughout the client lifecycle will be more accurate. They should continually feedback alert outcomes, minimize false positives, and increase true discoveries.
4. Boost security
Both transactional data and alerts are transmitted as individual items throughout the workflow. They, therefore, pose less interception risk than traditional transmission approaches, which send both as bulk files. Putting it simply, the attack surface is several orders of magnitude larger.
5. Gain end-to-end visibility
An effective transaction monitoring system needs to work in tandem with a wide range of financial risk workflows, linking up to politically exposed person databases, sanction screening systems and credit risk engines for example. Your AML solution needs to go beyond monitoring transactional behavior to analyze more general behavioral characteristics such as how people log on to their devices, the types of devices they use, or the adjustments they make to their profile settings. Having a clearer overall picture brings greater accuracy to your AML process and minimizes the intervention required from within the organization.
The future is predictive, but real-time needs to be mastered.
While predicting the threat is ultimately the end goal of shutting down financial crime, the path to gaining robust predictive analytics is to be a well-oiled real-time engine that acts just in-time to any threats discovered. While the benefits speak for themselves, there are still many financial institutions and fintechs that have yet to make the transition to real-time transaction monitoring. Why is this? Real-time AML demands a more complex architecture. It relies on fail-safe data feeds with high availability. Finding the right solution will take time, as will re-training staff and gathering the necessary resources to implement the change.
But with financial institutions under increasing pressure to provide reports, compliance teams struggling to manage a growing number of false alerts, and criminals finding ever-more sophisticated ways to cheat the system, real-time monitoring will continue to gain traction.