How often do you review your business activities and transactions for any irregularity or signs of non-compliance? If it is not done regularly, it easily misses the problems at an appropriate time.
According to financial crime expert David Clark, ” Ongoing monitoring is one of the most important defensive practices for all companies but particularly for those involved in highly regulated industries.” A proactive and ongoing review of the company’s operations is essential to reducing risks.
Effective ongoing monitoring programs provide for early detection of events indicative of possible fraudulent activity or other specified offenses that, if not deterred and detected, could result in serious monetary loss and legal/regulatory consequences.
The American Banking Association explains, “Constant vigilance through ongoing review is the surest way for banks and other financial institutions to satisfy their compliance requirements while protecting themselves from the devastating impacts of financial crimes like money laundering and terrorist financing.”
In this article, an analysis will be made of how best practices adopted in ongoing monitoring can reduce these fraud risks.
What is Ongoing Monitoring?
Continuous monitoring of every customer entails the periodic review of their accounts and transactions for any anomalies or suspicious activity.
It is one of the facets of constant CDD and KYC. Ongoing monitoring means that institutions are alert to changes in the client, the beneficial owner, or the nature of transactions inconsistent with the risk profile of the client.
This allows financial institutions to be alert to any new risks that may arise and ensures compliance on a continuing basis, not merely at the time of account opening, which is the case with normal AML/KYC reviews.
Specifically, the enhanced regulatory standards resulted in financial institutions increasing the frequency of ongoing monitoring checks by 40% as of 2024.
The Need for Ongoing Monitoring
Ongoing monitoring must be done with the help of an established review program to mitigate risks emanating from money laundering, terrorist financing, fraud, and other financial crimes.
Provided that ongoing monitoring is regularly done, institutions will be in a good position to tell if there is any unusual or suspicious activity or transaction at any particular time.
It also offers the chance to evaluate whether existing customers are engaging in any illicit activities over some time.
The ongoing assessment is an important module of effective ongoing monitoring in AML framework.
Fraud Risk Monitoring
The institution also exercises constant monitoring of client activities and transactions for any internal and external fraud attempts as a part of its ongoing monitoring process.
Customer profiling and analysis of transaction patterns are done on a regular basis to identify deviations and anomalies that may point toward fraudulent transactions, identity theft, or third-party fraud.
Reviewing high-risk alerts and thresholds set on accounts on an ongoing basis aids in the early detection of such fraudulent activities.
Advanced analytics and AI in monitoring have increased fraud detection rates by up to 30 percent in just the last two years.
Suspicious Activity Detection
The keys to the identification of suspicious activities and the filing of regulatory reports are effective policies and procedures for the ongoing monitoring of activities.
Client accounts can be screened continuously against internal and external databases and geopolitical risk factors to check for any matches/links to known financial crimes, wanted persons, and sanctions lists.
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We are monitoring financial transactions.
Under ongoing AML monitoring, institutions review transaction patterns, volumes, origins, and destinations for any complex or extraordinarily large transactions.
Dramatic or unexplained changes in a client’s transaction history or behaviors are flagged for further review through ongoing risk monitoring.
2024 has seen a 50% increase in the detection of complex transactions that deviate from the norm with the use of AI-enhanced tools.
Monitoring Changes in Regulations
To this end, financial institutions should be abreast of changing regulations and risk factors to ensure the continuance of effective compliance monitoring programs.
Besides the monitoring process, an organization is also subject to continuous risk assessment in order to comply with new regulatory requirements, which fall under the ongoing AML monitoring frameworks.
This comprises the periodic updating of internal policies, procedures, and monitoring systems in line with the relevant regulatory updates pertaining to sanctions, PEP screening, and suspicious activity reporting.
Effective Compliance Programs
Reviews of customer due diligence records, ongoing transaction scrutiny, staff training, and alert management perform a very critical role in confirming that the nature of continuing monitoring is robust and compliant over time.
The gaps and inadequacies that may prevail within the current compliance programs and ongoing compliance monitoring can be easily identified and strengthened through continuous compliance workflow monitoring.
Effectively Monitoring with Technology
Implement automated monitoring systems to continuously track large volumes of data from clients and transactions. This can only be helpful in identifying the trends across the scale.
Transaction monitoring software can then be set with risk-based thresholds and triggers for different transaction types, such as wire transfers or cash withdrawals.
Implement digital client onboarding solutions through iPhone app development to facilitate continuous updating and screening in relation to external databases with very little effort on the part of the user.
