Transaction Screening System: Fighting Money Laundering in the Business Sector 

transaction monitor

Partnership of business concept. Group of businessperson. Customer support. Teamwork.

The cases of money laundering are increasing with time globally. As per UNODC, the estimated amount of money that is laundered globally is 2% to 5%. This makes around 800 billion dollars to 2 trillion dollars approximately. Applying the latest transaction screening system can facilitate businesses dealing with money laundering and terrorism financing cases effectively. This way, companies can have a strategic advantage and work with genuine customers worldwide. 

The following blog discusses the significance of transaction screening system and how businesses can use them to accomplish their objectives. 

Transaction Screening System: A Quick Insight

Financial institutions have to follow the latest Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations while establishing business partnerships. The transaction screening system is suitable when businesses are dealing with high-risk entities such as PEP. In accordance with CFT standards, the approach facilitates businesses with customer profiling and risk management at industrial levels. 

A transaction screening system is a procedure through which financial institutions regularly monitor customer profiles to monitor high-risk transactions. This is where checking the background and financial profiles is essential to evaluate the risks and make accurate predictions. As monetary transactions can happen in real time, an AI-driven transaction screening system can help generate Suspicious Activity Report (SAR) easily. 

Four Phases of Transaction Screening System 

The rising number of fraud related to crypto is perplexing business experts and criminals who want to use innovative digital solutions to achieve an instant reward. Transaction Monitoring (TM) is essential to fight crime in the crypto space. The important steps of the process are below:

Phase 1: Getting to Know the Customer

Before establishing business relationships, Financial Institutions (FI) must ensure that the risk mitigation framework and Customer Due Diligence (CDD) systems are according to the AML/CFT standards given by the Monetary Authority of Singapore (MAS). The given framework can help experts calculate risk associated with customers’ profiles. Likewise, Financial Institutions (FI) must check data integrity 

Phase 2: Risk-Based Approach

The second stage of transaction monitoring is about implementing risk-based calibration which financial institutions can easily configure according to organisations’ parameters. This way, experts can also implement back-testing to examine previous data and make predictions accordingly. It plays an important role while making modifications to the system. This approach also facilitates identification and examination of fraudulent activities linked with data integrity. 

Phase 3: Implementing the Process

In agreement with previous stages, it is also important for financial institutions to guarantee the quality training of staff members who will handle the TM process and receive alerts. Financial Institutions (FI) must train their employees adequately and offer guidance to reduce human error. To streamline TM process implementation, staff members must be able to conduct pre-transaction checks and manage alerts properly. 

Phase 4: Dealing with the Issues & Improving the Performance

When financial firms detect abnormal financial activities, concerned experts must file Suspicious Transaction Reports (STRs) with the officer immediately. If financial institutions want to keep their relationship with clients, experts must put in advanced measures to mitigate risks linked with accounts.

Such protocols are also known as post-STR practices, which are about thoroughly checking suspicious accounts for compliance or approval from authorities before making monetary transactions. This way, financial institutions can perform Quality Assurance (QA) checks and manage notifications. It increases robustness of the transaction monitoring process. 

As per Markets & Markets report, the global transaction monitoring market size will achieve a financial worth of approximately 16.8 billion dollars in 2023, showing a CAGR of 15.1% from 2018 to 2023. 

The cloud deployment mode will grow exponentially during the given period because Small and Medium-sized enterprises will adopt a cost-effective deployment mode. This also facilitates SMEs to avoid costs related to hardware and other technical stuff. In reality, cloud-based platforms offer SaaS-related security protocols which quickly secure business applications. From this opportunity, companies having a tight budget can greatly benefit regarding security investments. 

By region, North America will become the largest revenue-generating jurisdiction for transaction screening system. In the APAC region, SMEs will quickly adopt innovative digital solutions to instantly identify fraudulent transactions and discourage money laundering cases. 

The Bottom Line 

Implementing only KYC systems for managing risk can generate false positives. Applying the latest transaction screening system can help businesses offer valuable information and proof needed for examining fraudulent transactions. Using a cutting-edge KYT system is important for Financial Institutions (FI) to identify suspicious transactions and mitigate the risk of money laundering and terrorism financing cases. This means FI must incorporate risk awareness and mitigation protocols for effective implementation of KYT measures.

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