Transaction Monitoring: What Is It and Why Is It Important?

credit-cardIf your business involves customers making transactions over the internet, you may have heard of transaction monitoring (TM). You may be wondering what it is and why it is important for your business to use this type of technology. If so, this article will give you the answers you are looking for.

What is Transaction Monitoring?

Transaction monitoring reviews and analyzes suspicious financial transfers and commercial transactions in digital and fiat currencies that are made through a website. It can tell you about your customers, including whether they have interacted with you before or if they are new so that you are aware of your customers’ activity. It has the ability to observe all types of dealings including deposits, withdrawals, and transfers. This technology is often used by financial institutions to expose anti-money laundering (AML) as well as terrorist financing.

By having it in place, you have some of the best protection against money laundering and terrorist financing as you can identify any movements that are potentially suspicious. If any suspicious customers are found, you can fill out a Suspicious Activity Report (SAR). If a transaction is identified as being potentially suspicious, an additional investigation can be launched where investigators can then look into the specifics of the customer or transaction, finding out whether the money was obtained legally or illegally.

Why is it Important?

TM can ensure that financial services are able to identify any suspicious activity without delay. With demands ever-increasing, having an effective Synthetic Transaction Monitoring in place can ensure prompt action and prevent fraudulent or terrorist behavior. By examining the data that is collected, it can ensure that the right steps are taken to minimize the risks of money laundering and terrorist financing. This can work alongside your existing systems and datasets. You get feedback on data, along with real-time and retrospective analysis. It is easy to implement, and it can reassure regulators and banking partners that you are using a system that is secure.

Doing Your Part

By having the right systems in place, you can ensure that your business is doing its part to stop illegal dealings from taking place. This can protect your business from being taken to court for failure to prevent money laundering. It includes all types of monetary actions from currency exchange to any other payments.

Getting the Most from this Technology

Being able to choose the best software will help to prevent too many false alerts or no alerts at all. Not all systems are designed the same so do your research to find the one that’s most suitable for your business. You’ll need to create rules to determine what is considered normal behavior on your site. Spend time evaluating parameters that will reflect suspicious deals as you don’t want to be receiving false alerts when the problem is due to poor data. Checking the data inputs is essential as the risk profile of the customer needs to be correct. If there are mistakes, false alerts will be generated and you’ll be at greater risk. Tweaking should be all part of the process as you want to make sure that the system is working optimally. You should review the system and all data six months post-installation and once every year thereafter.