10 Essential Components of Ongoing Monitoring in AML Compliance
April 1, 2024
Keeping a look out for money laundering in institutions is definitely not an easy task. This is because the operations are complex and there is too much money going in and out. But there is one tool that can make this difficult process simpler and that is ongoing monitoring in AML compliance. But what is ongoing monitoring, and what parts of it are the most effective for successful AML compliance?
Ongoing monitoring in AML compliance is a lot like a supervisor continuously keeping an eye on the transactions taking place within an organisation from what comes in and what goes out. It examines all customer activities in order to identify any unusual behaviour that may be indicating crimes like money laundering.
Key Takeaways on Ongoing Monitoring in AML Compliance:
- Customer Due Diligence (CDD): Thoroughly collect customer data to establish a baseline for monitoring and assess the risk associated with each client.
- Risk Assessment: Prioritise monitoring based on the level of risk posed by clients, considering factors like location, business type, and transaction volume.
- Transaction Monitoring Systems (TMS): Use advanced algorithms to identify irregularities in transaction patterns, such as structuring or unusual volumes.
- Threshold Monitoring: Set thresholds for transaction types to detect abnormal practices, triggering alerts for further investigation.
- Automated Alerts: Employ automated systems to notify compliance teams of suspicious activities promptly, facilitating quick investigation and action.
- Regular Reviews and Updates: Continuously review and update AML compliance processes to adapt to evolving threats and regulations.
- Transaction Analysis: Combine automated systems with human analysis to detect complex transaction patterns indicative of money laundering.
- Sanctions Screening: Screen transactions against sanctions lists to ensure compliance with global regulations and avoid unintentional dealings with sanctioned entities.
- Record-Keeping: Maintain detailed records of customer transactions and monitoring activities to demonstrate compliance during audits or investigations.
- Internal Controls and Oversight: Implement strong internal controls and oversight mechanisms to ensure ongoing monitoring processes are effective and consistent across the organisation.
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START NOW1. Customer Due Diligence (CDD)
The first and foremost component is performing customer due diligence very thoroughly. With the help of this practice, businesses can get their hands on the identity of their customers and also the way they make transactions to lay out a baseline for monitoring in the future. CDD works by collecting all important data like identities, beneficial ownership as well as risk profiles to understand the risk degree linked to each client.
2. Risk Assessment
Not all clients carry the exact same degree of risk when we talk about crimes like money laundering. With the help of a powerful risk assessment system, businesses can decide the clients that need more attention and prioritise monitoring the ones that are more riskier. It takes into consideration the location of customers, their type of business, the volume of transactions and behaviour in the past in order to decide the level of risk.
3. Transaction Monitoring Systems
The TMS can filter through enormous amounts of information and identify irregularities in patterns. When suspicious activities are seen, they are looked into more deeply and investigated. Many times, these patterns are, structuring, layering and unusual volumes of transactions.Transaction monitoring systems do so by making use of advanced algorithms and technology.
4. Threshold Monitoring
Creating thresholds for some transaction types can also help in identifying practices that may not be normal. Screening transactions against these thresholds can also help in seeing warnings. These may include sudden large transactions, transfers to areas that are highly risky or to industries that are labelled risky. If any of these are seen, alerts can be triggered and more examination can be done.
5. Automated Alerts
With the help of automated alert systems, AML compliance officers or teams can be immediately notified if any suspicious activity is seen which can lead to quick investigation and elimination of that risk. These alerts are turned on on the basis of some criteria that have been defined earlier in the transaction monitoring system and call for attention to examine how valid the alert is so that an action can be taken, like filing a SAR.
6. Regular Reviews and Updates
The AML compliance process ought to go through everyday review and refreshes so that the company can adapt to changing threats and regulations issued by authorities. When a business does not stay up to date, it allows money launderers to take advantage of its weakness. Businesses can evaluate how effective their current controls are, may update risk assessments and even take notes from recent incidents.
8. Transaction Analysis
Automated systems have changed the way businesses work but the need for analysis done by humans is still necessary to detect patterns or irregularities. By hiring skilled analysts, businesses can get insights into complex transactions. The analysts can do so by looking into the transactional data, profile of customers, etc, to recognise the risk of money laundering.
9. Sanctions Screening
Screening transactions of client exchanges against sanctions lists makes sure that you are complying with the regulations worldwide and are not unintentionally working with sanctioned people or businesses. With the help of sanctions screening you can check client names, addresses, and other identifying information against lists of people, businesses, and nations who are on the sanctions list.
10. Record-Keeping
Maintaining thorough records of customer transactions and ongoing monitoring activities is all about keeping detailed records and documents of transactions made by your customers and monitoring activities. You can show that you are following regulations and complying with them at the time of an audit or investigation. Moreover, when businesses have detailed records available, they can check the history of transactions and recognise changes in the behaviour of customers and also provide proof of AML compliance.
11. Internal Controls and Oversight
Having strong internal controls and mechanisms for oversight helps in making sure that the ongoing monitoring processes are being run regularly and effectively across the organisation as this reduces the risk of missing out on information. Internal controls can be established by dividing duties, having dual authorisation for transactions that are highly risky, and performing audits to make sure that you are complying with the policies.
Ready To Opt For Ongoing Monitoring in AML Compliance
Ongoing monitoring in AML compliance has many aspects to it and calls for the use of advanced technology, human expertise as well as strong screening processes. By making use of the ten components we have discussed above, you can comply like never before. Visit AML Watcher for more details on our ongoing monitoring services.
