Search Icon Search Icon Menu Icon Menu Icon

24 August 2021, 15:10


A brief introduction to Transaction monitoring

Key objectives of Transactions Monitoring

To provide a brief overview of the need for Transaction Monitoring

Consequences of an ineffective Transaction Monitoring System

Monitoring transactions is about understanding and mitigating risk. It goes beyond thresholds and hard-coded words and delves much deeper into the associated behavioural activity, both financial and non-financial. Effective transactions monitoring should not looking at a single event (or transaction) in complete abstract, utilising as much data as possible to paint the fullest picture possible enables both the synthetic mind and the human one to better understand the level of risk and suspicion involved.

Transaction Monitoring, when done well should very much reduce the risk that an organisation has of being misused for Money Laundering and other forms of financial crime, it protects significantly more than their license to operate, but also their reputation. It reduces friction in the relationship with their customers.

28 FTE

Average saving over 3 years with effective Transaction Monitoring system

$32 Billion+

Fines levied against financial institutions within the past 2 years

Fines for non compliance:

Fines for non-compliance have arisen for the following 4  reasons in the area of transaction monitoring.

  1. Lack of resources
  2. Not reporting suspicious activity
  3. Insufficient Monitoring Systems
  4. Ineffective risk-based frameworks

Key Challenges

One key AML Compliance challenge is to use innovation to do the heavy lifting in financial crime.

Over 90% of alerts are ignored due to lack of resources


Why is Transactions monitoring important ?

Transaction monitoring is an important first step for any financial institution’s in its AML and CTF procedures. Ability to spot a suspicious transaction could potentially prevent thousands or millions of dollars from being laundered by criminals.

Additionally, having transaction monitoring in place gives regulators and banking partners confidence. It shows that a financial institution takes AML and CTF regulations seriously and is doing all it can to prevent criminal activity. This creates trust between new and/or current partners.

In 2020 countries such as Australia and Sweden were fined 763 and 770 million Euro respectively for their failure in adapting to required transaction monitoring software.

What is the promise of AI?

Frontier technology is talked a lot especially in the field of Artificial Intelligent and machine learning. Nevertheless Frontier Technologies like AI and ML are there for many years.

Regulators around the world learn to understand the benefits and also the risks around frontier technologies.

Mostly you might reed that AI is only used for the reduction of so called false-positives. Regulators don’t require the use of AI ! Some of them are even against it.

Traditionally AI was used for financial institutions to lower thresholds without increasing false positive numbers.

In fact, false positive rates will drop. This concept is broken and most of the available AI-Solutions showed it didn’t work that easy and as promissed. If there is one thing that AI can not promise then it is the reduction of false-postives. The promise of AI is to support Compliance Professionals and not to replace them.

Why: AI is around since ten years + and all the institutions who use it have endless amounts of false positives.

The promise of AI is : To Discover the unkown not the well known

How do regulators react to the use of AI?

Regulators around the world learn the benefits and challenges of AI and ML. Regulators need to understand what the Role of AI in Transactions Monitoring is !

As Regulators move ad different speed. A global picture shows that Explainable AI is on the rise.  The reason behind this trend is to put the Control of Frontier Technologies in the hands of humans and not the machines. Compliance Professionals and regulators  become more and more educated about the potential and the challenges of AI and other frontier tech.

AI will never take over as this is not the promise of AI.

How to find and evaluate a Transaction Monitoring Solution

Do your homework and invest upfront time and effort to evaluate which transaction Monitoring Solution you need and want. Our Buyers Guide that you can download in our Whitepaper sections can help you here.

If you want to build your own system, good for you. However, keep in mind, there are probably people around that can support you in a much smarter & faster way.  If you have already a self-built solution make sure that your current solution is up to date and there is continuous improvement. Otherwise you should evaluate state of the art Transactions Monitoring Solutions to ensure you’re not caught out.

The benefits of a Specialized Vendor in AML Transactions Monitoring who provide you with AML Software, both in terms of screening and on-going monitoring for high-risk and suspicious activity could prove priceless!

Key Challenges

Key AML Compliance challenge is to use innovation to do the heavy lifting in financial crime.

Off-the-shelf transactions monitoring software is keeping up with digital transformation, nor with criminal behavoiur. Financial crime is envlolving globally at record pace!

Reduction in False positives is not always the key challenge for all organizations. A young fintech company who recently applied for a license might not face any false positives at all, but often need to widen the type of behaviour they’re monitoring to capture enough.

AML is not broken! Compliance has changed from a back office function to a business enabler that uses an Innovative approach.

AML as a function needs to keep up with the changes happening around us. From digital transformation, to the expectations of the millennial generation

Buy vs Built

Never built if you can buy a solution that is fit for your company. The reason for this is that in the past several institutions have been fined for having their own systems which were built once and never updated.

Compliance Professionals who want to build their own systems can go this route if they have the resources to do so. As most Porjects run over time and over costs it is all about planning. Our tip here is to engage early with Regtech providers.

Signing up gives you exclusive access to essential industry insights, don’t miss out!


Money Laundering in the Art World

The introduction of 6AMLD regulations aims to reduce financial crimes.

Get access

27.07.2021    AML Compliance

PEP Screening and Sanctions – AML & CTF

Uncovering the PEP and Sanctions Lists and Global Regulation

Get access

26.04.2021    AML Compliance

RegTech The New FinTech

How Fintech has set the foundation and facilitated the growth of Regtech.

Get access

Keep yourself up-to-date

By clicking the Button you confirming that you’re
agree with our following Terms and Conditions