In order to counter the risks of terrorist financing and money laundering, financial institutions must have in place a proper system for transaction monitoring. The responsibility of reporting suspicious transactions was further emphasised after the first AML directive was introduced in 1991, and as years go by, this responsibility becomes even more urgent. The team at Computime Software takes a look at some of best practices to incorporate into any AML transaction monitoring solution.
1. Proper risk analysis at client level
The better your KYC procedures are, the easier it will be to identify discrepancies between a customer’s risk profile and a given transaction.
2. Transaction profiles
Profiles should be kept up-to-date and comprehensive, supported by any relevant documents which explain and illustrate any anticipated transactions. They should also be specific – the identification of unusual transactions can be facilitated by establishing payment limits, with clear descriptions of expected items and money flows.
3. Online viewing rights
Crucial to transaction monitoring is the trust office’s information position. In other words, the trust office should have access (preferably digital) to all bank accounts of the target company, even if it does not authorise payments to these accounts. With the use of real-time monitoring, transactions can be reviewed before being implemented or afterwards through post-event monitoring. Depending on the risk profile of the client, the frequency of bank accounts being monitored and obtained should be adjusted accordingly.
4. Specifically-designed procedures to monitor the rights and obligations entered into by a target company
A form especially created and designed to fulfil the above purpose can capture and analyse the rights and obligations of the target company in detail. Attached to the form should be any underlying and relevant documentation. To make a judgement, an external or internal legal expert may be appointed.
5. All monitoring and related activities should be well documented
Full records should be kept, detailing various aspects of transactions made, such as their selection, the reasons why they were selected, which of their aspects have been reviewed including any supporting documents, the involvement of a compliance officer (if any) and an examination of any decisions taken and on what grounds they were made.
6. Reassessment of previous and related transactions
This procedure should be undertaken in case of any suspicious transactions being flagged. Reviews of related or previous transactions can provide an insight to any possible patterns of unusual activity, followed by a review of the client’s transaction profile. The 4th AML Directive even recommends that the effectiveness of a company’s transaction monitoring process be reviewed on a regular basis to allow trend analyses to be carried out. Therefore, full access to past data is highly important.
Enhance Your AML Transaction Monitoring with AXON
AXON offers a robust, effective and easy-to-use AML transaction monitoring platform built for financial institutions. It employs a risk-based approach which helps you monitor individuals, entities, and transactions in real-time to detect any suspicious activity. For more information about AXON’S Transaction Monitoring platform and how it can help your business, contact Computime Software today.