Transaction Monitoring

In line with FATF and EU standards, the local landscape, through the PMLFTR and FIAU IPs, mandates that subject persons scrutinise transactions undertaken on a continuous basis. The effective monitoring of transactions is essential in detecting whether these are consistent with the subject person’s knowledge of the relevant customer (including their business and risk profile) and to flag any transactions that are suspected to be connected to financial crime.

Whether you are using AI, have adopted automated rule-based systems, or are still using manual systems to carry out transaction monitoring, the challenges faced to ensure the smooth and effective running of these systems are still felt across industries. It is crucial in this ever-evolving regulatory environment to ensure that whatever system being used is and remains fit for purpose. Furthermore, the data gathered in the course of transaction monitoring represents an invaluable source of insights into the subject person’s AML risk profile and beyond. 

Some challenges:

• Systems generating a high volume of "false positive" alerts, requiring additional resources and costs;
• Using an off-the-shelf tool which is not adapted to your specific operations and risks;
• Some of these systems represent a ‘black box’ which users do not fully understand and are not able to explain, in particular when using AI and machine-learning (ML) models, leading to a lack of trust in the system and challenges to ascertain compliance with legal and regulatory requirements;
• Poor data governance - Even if powerful tools are being used, analysing the underlying data often remains a challenge, with poor data quality and completeness leading to ineffective monitoring.