Transaction Monitoring and Suspicious Activity Reporting (SAR)

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Supervising Financial Transactions and Reporting Suspicious Activities

As per the Anti-money laundering program, both transaction monitoring and suspicious activity reporting is a method of identifying and mitigating illegal transactions by customers. With Transaction monitoring the organization can track the details and activities of high-risk clients and if such suspicious activity in money laundering is found to immediately mentioned in the suspicious activity reporting Document to be sent to the authorised authority for further evaluation and actions.

Brief about Transaction Monitoring

Transaction Monitoring is a software used by financial organizations to track the financial transactions of customers, including both current and past information and other conversations or interactions, to get the complete details of the customer activity such as transfers, deposits, and withdrawals.

One of the most significant ways for transaction monitoring under AML compliance is that employees would manually look into every transaction done by the customer by evaluating and interrogating. The transactions of the customer get authorized only after a final review is done by the authorized employee of the company.

It is very common nowadays, with the advancement of technology, that financial firms are more often exposed to money laundering activities because of the growing digitalization of the transaction procedure, making it more convenient for the customer experience. Transaction monitoring under anti-money laundering (AML) is the procedure to identify the suspicious activity or behaviour of the customer indicating illegal activities of money laundering or other financial crimes.

This transaction monitoring system is a kind of red flag; whenever the automated software of the company gives a signal or alert, it is the responsibility of the company employee to investigate if the alert is a true hit or false positive. For a transaction of the customer that is confirmed after the due investigation by the employee that the said transaction is a true hit of either money laundering activities or terrorist financing, the financial enforcement team needs to be alert with such customer and thus preventing the reputation of the company.

It is very important for the financial organization to conduct ongoing transaction monitoring because of its wide range of financial businesses that are more exposed to money laundering activities.

Activities Under AML Transaction Monitoring

If your company is looking for an expert in the field of AML advisory and transaction monitoring, you are on the right page. Enterslice has professionals who not only provide a service but craft a solution for the clients with the utmost satisfaction, thus helping the organization avoid any illegal activities, fraud, money laundering, and terrorist financing and contributing towards the overall growth of the company.

Every organization is unique by itself; thus, they differ in various ways; our professionals have dozens of experiences with a variety of organizations from different sectors. The transaction monitoring system varies from company to company and is unique to the kinds of business they deal with, such as geographical location, size, sector, complexity, profile of the customer, corporate culture, and associated company operational risk.

Enterslice professionals in Anti-money laundering shall adopt the following procedures on transaction monitoring such as

  • A risk-based approach- As per the anti-money laundering programs by the organizations, the risk-based approach is the most significant method of enhancing the customer due diligence and enhanced due diligence of the customer and high-risk customers. This suspicious detection of the illegal activities of the customer through transaction monitoring is followed by such risk-based approaches around the globe.
  • According to the FATF (Financial Action Task Force), the financial institution shall conduct its transaction monitoring to align with the organization's risk assessment and individual customer risk profiles. Transaction monitoring assessment shall be a continuous method to track the activities of the customer at risk.
  • If you are seeking a professional who would guide your company for transactional monitoring, an entry-level team of experts gives you the best service on various effective due diligence and regulations required for the company to avoid illegal transactions and activities proceeding in the company. We shall simplify the transaction monitoring by first conducting the due diligence of all the onboarding customers and enhancing the due diligence of the high-risk customers.
  • Transaction monitoring is a time saver, where customers' transactions are analyzed automatically through the software whenever they occur. This is not a regulatory requirement, but it will help the company to facilitate the customer faster, timely decision-making, on-time payments, and better use of the employees with greater outcomes, leading towards the growth of the company.

Why AML Transactions Monitoring is Essential

Enterslice shall Adopt flexible rule-building on tailoring the transactions monitoring on the companies' customers' activities. This rule is an integral part of due diligence, and we shall continue this monitoring along with the ongoing work to effectively detect suspicious activity. Our service will reduce the lengthy timescales, operating costs and high levels of false positives.

Traditional software used by the company is fixed by automated features by fixing certain limits or criteria; thus, the software alerts according to the company-generated features. This traditional transaction monitoring is not so effective with the growing technology advanced customers, enterslice thus enhance rule-based transaction monitoring systems with AI. With the introduction of artificial intelligence, the company will be able to spot greater insights, behaviour, and patterns that traditional rules cannot; with this, the company will be able to reduce the incidence of false negatives. Artificial intelligence is now playing a key role in fighting against financial crimes. They can detect unusual and anomalous transactions that a human can't. Artificial intelligence enhances transaction monitoring and does not replace the rule-based approach.

The financial sector is growing rapidly along with technological advancement; with this rapid transformation, several challenges have occurred for the organization, such as transaction monitoring and suspicious activity by customers. It has become difficult for the financial firm to keep track of ongoing transactions and to identify suspicious activity around the transaction. Anti-money laundering tools help organizations cut down on such struggles and assist companies in tracking transactions effectively despite the huge volume and complexity of transactions. The AML monitoring tools include the algorithms method to identify illegal activities and hence help the financial firms to prevent, detect, and flag suspicious activities.

Laws and regulations evolve with the growing needs of global advancement, as we know that money laundering and terrorist financing are some of the challenges that are fought by the entire globe. Every country has its regulations and compliance on Anti-money laundering prepared by the particular government.

The regulation of AML constantly evolves, and thus, financial institutions need to adapt to such changes. Transaction monitoring tools help the company get real-time updates on the changes in anti-money laundering compliance and remain relevant to the latest changes in the regulations to comply with compliance requirements.

AML transaction monitoring is a tool that provides access to necessary information the company must have to prevent money laundering activities. This tool is based on the algorithm method, which automatically inserts and creates data on transactions, customer details and data on the watchlist of the high-risk clients. The financial company, with the help of technology monitoring, will be able to make an informed decision on the customer's transactions and ensure that AML regulations are complied with.

The company needs to safeguard the reputation and damage of the company profile. Transaction monitoring is one of the kinds of tools a company must have to prevent illegal activities on money laundering and other criminal activities like terrorist financing. The financial company can reduce potential illegal activities by using AML transaction monitoring tools, which also help the company comply with regulations. This tool also provides evidence to support enforcement actions if any criminal activity is detected.

Brief of Suspicious Activity Reporting

The Suspicious Activity reporting has to be prepared or filed formally by the company or an organization as an alert or intimation to the law enforcement office regarding the potential activities of money laundering and terrorist financing by the respective customers. Any company needs to maintain and report any suspicious activity on money laundering and terrorist financing activities.

Suspicious activity reporting is not only mandatory for financial firms but also for individuals as well as professionals like lawyers, accountants, real estate agents, etc., whenever they have suspects or knowledge about money laundering or terrorist financing activities has been popping up.

In India, the regulatory body for Anti-money laundering and its Suspicious Activity Reporting is regulated under the Prevention of Money Laundering Act of 2002. A suspicious transaction, according to the said act, means a transaction, whether or not made in cash made by a person acting in good faith, gives doubt on a reasonable ground that he is involved with the money laundering activities, creates a situation of unusual or unjustified complexities or appears to have no rationale economic or a bonafide purpose.

Importance of Suspicious Activity Reporting

Suspicious activity reporting helps the organization and individuals to stop the illegal activities related to money laundering and terrorist financing and thus prevents the repercussions of financial crimes. The employees shall act as a defence protecting the organization from any illicit transactions passed within them.

This Suspicious activity reporting connects the organization and law enforcement. The organization must report any suspicious activity passed within them to law enforcement; this law enforcement works as an instrument tracking the suspects involved in various crimes, such as drug dealers, sex offenders, financial criminals, distributors of illicit materials, etc.

In India, under the Prevention of Money Laundering Act, a program on money laundering and counter-terrorism financing is held to comply with the obligations of reporting suspected illegal activities related to money laundering, terrorist financing, drug trafficking, etc. This suspicious activity reporting is very important for the development of financial intelligence resources used by national securities agencies, law enforcement, and revenue.

Financial Intelligence of India assists in fighting against money laundering activities and terrorist financing along with law enforcement, revenue, and national security agencies. The greater the quality of the report, the greater the accuracy and thus ability to detect deterrence of the disruption created by financial criminals

Who can be considered a Suspicious Activity

According to the Prevention of Money Laundering, suspicious activity includes

  • The identification of the customer's false Documents, Documents that are taking more than a reasonable time for identification,
  • If the client does not contact physically, doubt the real beneficiary of the customer account if the customer opens an account with names very similar to the other established organization or business entities.
  • A customer who has a criminal background or links with known criminals.
  • The customer has a multiple number of large accounts, having a common holder of an account and with no rationale signature.
  • Unusual with no explanation transfers of multiple accounts with no rationale.
  • If the customer transactions' sources of funds are doubtful, unusual, or unjustified in complexity, and any off-market transactions are suspicious.

Enterslice Anti-money laundering experts will assist the organization in detecting and identifying various suspicious activities by various customers with effective transaction monitoring structures. We are familiar with the service of reporting threshold amounts, transfer of large sums from overseas making payments, clients inconsistent in making a payment, a block deal made by the customer out of market price, etc.

In India, suspicious transaction reports can be filed either manually or in electronic format. A reporting agency needs to submit this suspicious transaction report to the Financial Intelligence Unit (FIU) India in either manual or electronic format if it has the technical capacity to do so.

Advanced Technology

New technologies are making it easier for the company to keep track of a huge volume of transactions by customers. Companies can cut costs and thus increase employee productivity by engaging them productively. Technology has also made a user-friendly process, making it easier for companies to comply with reporting compliance and regulations.

With this advanced technology, companies are enabled to get data from various industries due to the permissible data flow system. It becomes easier for the company compliance team to understand the level of customer risk, and thus, the company would be able to make better decisions on pursuing investigations.

This machine learning and AI integration in the transaction monitoring of suspicious activity have provided a multilayered approach to detecting more suspicious activity while reducing the noise with speed and precision.

Technology also enhances the real-time monitoring of customer transactions or activities with the multi-layers of protection; thus, companies can investigate in a swifter and smarter way. With the adaptation of technology in the companies, they are not only able to detect onboarding illegal activities but also detect accurate threats with extensive and industry-proven library rules; it also reduces the false positives by the process of optimizing procedures.

Benefits Transaction Monitoring and Suspicious Activity Reporting (SAR)

Both transaction monitoring and suspicious activity reporting help the company detect and identify risks involved with customer transactions, thus preventing the industries from damaging their reputation and integrity. Some of the benefits of transaction monitoring and suspicious activity reporting are

  • It helps companies detect illegal activities such as terrorist financing, money laundering, market manipulation, etc., much earlier based on customer transaction behaviour and its pattern.
  • Companies’ reputations and integrity are safeguarded from damage by mitigating the risk involved with the customer profile, companies, business entities, etc.
  • Both transaction monitoring and suspicious activity reporting are important compliances to be followed by the financial company under anti-money laundering compliance and regulations, thus reducing the risk of penalties.
  • This SAR helps the company enhance its security measures. With this enhancement of security procedure, the organization could prevent money laundering and illegal activities by the company.
  • Suspicious activity reporting helps the company share data globally with other entities over the globe, which helps the company collaborate with other industries, thus contributing to the fight against money laundering activities.
  • Transaction monitoring and its analytical machine learning make sure that companies stay ahead with the compliance and regulations, thus detecting and alarming the company about the merging threats.
  • Transaction Monitoring and Suspicious Activity Reporting serve as evidence for the financial enforcement team and help the financial investigation agencies combat financial criminals.
  • With the advancement of technology, the company can detect and identify suspicious activity risks very quickly, thus reducing the manual compliance review and the cost to the industries or entities.
  • This method of reporting under AML compliance maintains the reputation and integrity of the organization, thus attracting more customers.

Enterslice: The best Compliance Advisor

Enterslice is a consultancy company that provides various services such as legal advice, risk & assurance, tax & audit, etc. We have been serving various organizations, including start-ups, thus helping companies to grow effectively. Transaction monitoring solutions are very important for companies, more specifically to the banking sector. We assist companies in setting rules on transaction monitoring on suspicious activity by the customer and thus report the same to the financial investigation unit. Our due diligence expert team also helps businesses comply with anti-money laundering (AML), know your customer (KYC), and customer due diligence rules (CDD).

We shall assist the company in creating software complying with all the AML(anti-money laundering) regulations for monitoring the transactions of high-risk clients more effectively. Enterslice also guides the companies in monitoring the transaction by choosing the best rules and scenarios as per the business structure. Our experts shall identify the suspicious activity of the customer by intervening as quickly as possible.

Our compliance service differs from business to business. We improved and changed the compliances as per the company's requirements. The AML advisory team makes sure that the company complies with the needs of the business in the market, hence helping the company grow without taking any risks.

Frequently Asked Questions

A few examples of a transaction monitoring scenario are suspicious large amount transactions, rapid funds movement, tax heaven countries, and structuring transactions to avoid reporting thresholds.

The transaction monitoring analyst works based on software that alerts to identify potential money laundering activities, fraud, and other illicit activities.

The transaction monitoring process job includes performing and conducting customer due diligence activities like identifying customer profiles and their verification, complying with the business compliance standards, and ensuring that it complies with the requirements as per the law and thus delivers an exceptional customer experience.

One should look for software with algorithm technologies along with artificial intelligence tools that help the company instantly identify and detect high-risk transactions.

Yes, transaction monitoring is a very important part of the AML that helps the company regulate and investigate illicit activities that expose them to money laundering crimes.

It is the responsibility of the financial company to monitor the transactions of the customer and thus report to the financial investigators.

The know your customer is the details of the customer, which are later used by the company for monitoring the transaction of high-risk clients, thus preventing money laundering activities.

A suspicious activity report is a very important report to be filled by financial institutions and other individuals on suspicious transactions with possible connections with money laundering or terrorist financing to the law enforcement authority.

SAR means suspicious activity reports.

Suspicious activity reports in transaction monitoring are the key components of AML compliance along with the KYC and CFT requirements.

According to the Prevention of Money Laundering Act, suspicious transactions are those transactions, whether or not made in cash to a person acting in good faith, which gives rise to a suspicion reasonable ground, connecting to the money laundering activities.

The high-risk customers are the ones engaged in the bureaucracy with a high propensity to engage in taking bribes or corruption. Citizens of the sanctioned country are to be avoided.

Yes, Anti-money laundering is a financial crime. It is a method used by financial criminals to obtain money illegally and thus convert them into legitimate sources.

The basic AML program includes risk assessment, customer due diligence, ongoing monitoring, etc, to predict the risk involved with the customer relationship.

The 4 pillars of the AML policies are the development of internal policies, controls, and procedures, the anti-money laundering compliance officer responsible for the program, training for the employees, and independent testing.

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