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KYC Transaction Monitoring – An Increasing Need of the Financial Sector

by aoneseo
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Transaction monitoring is the process of tracking a user’s monetary activities such as deposits, transfers, and withdrawals. The technology will search for questionable activity that might indicate money laundering or financial fraud.

The monitoring program’s classification of transactions as suspicious necessitates further investigation to determine whether the warning is valid or not. True discoveries must report to law enforcement as an STR in order to notify them of potential money laundering or terrorist funding operations. Continuous KYC transaction monitoring is a regulatory requirement for a wide range of business sectors that are subject to anti-money laundering laws.

KYC Transaction Monitoring Software

A business can still track client transactions in a number of different ways. The KYC transaction monitoring system chosen will be influenced by a variety of firm-specific factors, such as:

  • Working environment culture
  • Factors to take into account include size, diversity, and geographic reach
  • Operational threat associated with it
  • Customer profile, including any intermediary’s risk level

The following are a few things to keep in mind when checking, even though money laundering authorities do not provide specific recommendations.

No matter how a business handles transaction controls, authorities require a risk-based approach to AML actions, which includes enhanced due diligence on high-risk clients. This pertains to checking and requires the procedure tailoring to the user’s risk profile.

According to the FATF, financial organizations should adjust the scale and scope of their checks based on organizational risk assessments and the specific risk profiles of their clients.

The FATF also advises, on a regular basis or when specific transactions occur, to conduct continuous transaction monitoring or client due diligence.

When the risk of money laundering is thought to be low, the Joint Money Laundering Screening Group (JMLSG) presents the case for simpler due diligence. According to this, if the standards are not met, the frequency and intensity of checks may decrease.

However, if the risk is larger, expanded due diligence approaches, such as increasing the volume of reviews, are acceptable in order to manage risk effectively and obtain more knowledge.

KYC Transaction Monitoring Recommendations

Adopt Flexible Rule Building

Detecting suspicious behavior and comprehending your transaction limits are the goals of transaction monitoring. Regulating bodies must update their policies frequently, though, in order to be as effective as possible.  As a result, it is possible to create and test rules autonomously as a result of the KYC transaction monitoring program. Using this method, we will be able to prevent long timeframes, high operating costs, poor monitoring, and many false positives.

Enhance KYC Transaction Monitoring Software with AI

You should be aware that historically, the systems you use to monitor customer transactions relied on rules to spot unusual activity. A policy might send out an alert, for example, if a customer spends more than £10,000. Even though guidelines are crucial for identifying suspicious behavior, they can only stop money laundering that has already been established.

Traditional transaction checking systems’ regulations are ineffective and inaccurate because thieves’ techniques are constantly evolving.

Businesses use artificial intelligence to improve the transaction monitoring system because it can offer better insight and identify trends that traditional rules cannot.

Regulators do not mandate that businesses use artificial intelligence (AI) for fraud detection. Nowadays, businesses acknowledge widely that AI plays an important role in the fight against financial fraud. AI is able to search through all data and identify odd transactions that humans are unable to. AI is also capable of spotting unknowns, or the emergence of anomalous behaviors that defy the norm.

A KYC Transaction Checking and Start with Client

An individual user’s transactions should typically not be represented by a single image. In order to provide meaningful intelligence and understanding about your customers, make sure your transaction tracking combines diverse types of user data.

An end-to-end AML screening should be the objective. The fundamental ideas will vary depending on the organization, but they will always be the same.

A full compliance system allows for seamless integration of customer screenings and transaction monitoring system with end-to-end anti-money laundering compliance systems. 

Depending on the complexity of the company’s regulatory environment, companies can incorporate additional best practices into this process. Such as the evaluation of the client’s risk, the review of his or her activity, and sophisticated AML intelligence analytics.


KYC transaction monitoring is a need for all businesses that fall under the purview of anti-money laundering laws. Businesses use artificial intelligence and transaction tracking together to identify unusual or suspicious behavior and provide analysts with vital context. Efficient KYC transaction monitoring is necessary for evolving money laundering strategies to identify any suspicious transactions.

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