What is AML Transaction Monitoring
Anti-money laundering (AML) transaction monitoring software allows banks and other financial institutions to monitor customer transactions on a daily basis or in real-time. By combining this information with analysis of customers’ historical information and account profile, the software can provide financial institutions with a “whole picture” analysis of a customer’s profile, risk levels, and predicted future activity, and can also generate reports and create alerts to suspicious activity. The transactions monitored can include cash deposits and withdrawals, wire transfers, and ACH activity.
AML transaction monitoring solutions can also include sanctions screening, blacklist screenings, and customer profiling features.
The analysis is obtained primarily for the purpose of meeting various anti-money laundering (AML) and counter-terrorist financing (CFT) requirements, filing Suspicious Activity Reports (SARs), and fulfilling other reporting obligations.
Transaction monitoring and a risk-based approach
Broadly speaking, a risk-based approach requires that financial institutions employ intensive measures (such as enhanced due diligence) to manage risk for clients or scenarios that are deemed higher-risk, while for lower-risk clients or scenarios, and where there is no suspicion of money laundering or terrorist financing, simplified measures may be permitted.
To apply a risk-based approach, countries and institutions must take appropriate steps to identify and assess the risks of money laundering and terrorist financing for different market segments, intermediaries, and products on an ongoing basis. In line with the concept of a risk-based approach is acknowledgement that the nature and extent of AML/CFT controls will depend on a number of factors. The FATF, a global financial organisation that sets standards related to AML/CFT procedures, recognises the following factors as determinants of the proper extent of AML/CFT controls:
- The nature, scale and complexity of a financial institution’s business.
- The diversity of a financial institution‟s operations, including geographical diversity.
- The financial institution‟s customer, product and activity profile.
- The distribution channels used. The volume and size of the transactions.
- The degree of risk associated with each area of the financial institution‟s operation.
- The extent to which the financial institution is dealing directly with the customer or is dealing through intermediaries, third parties, correspondents, or non face to face access