It is concerning to know that organizations do not check their transactions and business operations for anomalies or indications of non compliance. It is easy to overlook such kinds of major issues at the right moment if it is not done on a regular basis.
“Ongoing monitoring is one of the most important defensive practices for all companies but particularly for those which are involved in highly regulated industries,” says financial crime expert David Clark. Reducing the level of risks has further required a proactive, continuous evaluation regarding the operations of business. Successful continuous monitoring programs enable the early identification of events suggestive of potential fraud or other specific offenses that, if not prevented and identified, might lead to significant financial loss and legal/regulatory repercussions at the same time.
“The best method for banks and other financial institutions to meet their compliance requirements while safeguarding themselves against the devastating effects of financial crimes like money laundering and terrorist financing is to maintain constant vigilance through continuous review,” according to the American Banking Association. Today in this article we will be studying how best practices are being utilized in continuous monitoring and can assist in lowering these fraud risks at the same time.
What is a Continuous Monitoring System?
Detailed procedure of reviewing the accounts and transactions of a specific person on a regular basis for any irregularities or suspicious activity is an essential part of a continuous monitoring system. It is a component of an ongoing KYC and CDD as continuous monitoring helps the institutions in keeping aware of any changes regarding the client, the beneficial owner, or the type of transactions that deviate from their respective risk profile.
This has played a pivotal role in guaranteeing the compliance continuously rather than just during account opening, as is the case with standard AML/KYC reviews, and enables financial institutions to be aware of any emerging risks at the same time.
The requirement of an Ongoing Monitoring System
An established review program must be utilized to assist the ongoing monitoring process in order to reduce the risks associated with financial crimes such as fraud, money laundering, and terrorist financing also. Institutions from the financial sector will be able to identify any suspicious activity or transaction at any given time if the continuous monitoring system is conducted in a regular manner.
Oftentimes, it has provided the opportunity to assess whether current clients are participating in any sort of illegal activity over the passage of time. An essential component of efficient ongoing monitoring in the AML framework is the ongoing assessment of the relevant risks.
Fraud Risk Monitoring by Ongoing Monitoring Process
The organization should definitely keep a close eye on the client transactions and activities for any attempts at internal or external fraud. Customer profiling and transaction pattern analysis are regularly conducted with an effort to find deviations and anomalies that might indicate fraudulent transactions, identity theft, or third-party fraud. It has seen that identification becomes easier for such fraudulent activity early on when high-risk alerts and account thresholds are regularly reviewed.
Suspicious Activity Detection by Ongoing Monitoring AML
Effective nature of policies and procedures for continuous monitoring are essential when it comes to spotting suspicious activity and submitting regulatory reports altogether. Accounts of the customers can be regularly screened against the internal and external databases as well as geopolitical risk factors in order to look for any connections to wanted individuals, sanctions lists, or known financial crimes.
Financial institutions that are subject to continuous AML monitoring are more prone to examine transaction volumes, origins, destinations, and patterns for any complicated or unusually large transactions. Significant changes in a client’s transaction history or behaviors are tagged for an additional examination through continuous risk monitoring.
Keeping an eye on regulatory changes by Continuous Monitoring System
Financial institutions should stay up to date on evolving regulations and risk factors in an effort to maintain successful compliance monitoring programs. The ongoing AML transaction monitoring framework has further included ongoing risk assessments that an organization must undergo in addition to the monitoring process in order to meet new regulatory requirements.
This further tends to include routinely updating internal policies, procedures, and monitoring systems in accordance with pertinent regulatory updates concerning sanctions, PEP screening, and reporting suspicious activities also.
Successful Compliance Initiatives
Elements like staff training, alert management, continuous transaction system, and reviews of client due diligence records are more likely to play crucial roles in ensuring that the nature of ongoing monitoring is stable and compliant over time. Continuous compliance workflow monitoring makes it quite simple to identify and strengthen any gaps or inadequacies that may exist in the current ongoing compliance monitoring. Click here to explore how continuous monitoring is transforming AML compliance and helping businesses prevent financial crimes.
