Top 6 Benefits of Transaction Monitoring to Combat Money Laundering

Anti-money laundering laws must be followed when banks and other financial organisations deal with huge amounts of transactions. Moreover, the rise in financial transactions is primarily because of online money transfers and FinTech expansion. The global transaction monitoring industry will reach a financial worth of around $16.8 billion by 2023, showing a CAGR of 15.1% from 2018 to 2023.

With the advent of the Internet, transferring money digitally has become a breeze. Whilst this is tremendously helpful for economic growth, it also makes financial crimes easier to commit and more rapid than ever. Thus, transaction monitoring is essential at a time when financial technology is booming, and crime is on the rise.

Understanding Transaction Monitoring

Transaction monitoring allows businesses to prevent fraudulent financial activities by analysing economic activities as they occur or over time. Moreover, global fines for failing to prevent money laundering and other financial crime increased by more than 50% from last year. All business financial transactions, like deposits, withdrawals, and wire transfers, can be tracked.

With AML transaction screening, businesses, banks, and other financial institutions can easily monitor and analyse vast amounts of data that could reveal fraudulent activities.

Why Do Anti-Money Laundering Experts Prefer Transaction Solutions?

The benefits of an AML transaction monitoring solution are numerous. The following are only a few:

• Real-Time Fraud Detection

Before transaction monitoring solutions for AML, fraud was mainly identified by looking at bank transactions over time. Moreover, over $5 billion was imposed in fines on banks and other financial institutions in 2022 for AML violations. But after using transaction monitoring solutions for AML, banks, and other financial firms may identify illicit monetary dealings. Hence, anti-money laundering measures become proactive rather than preventative.

Real-time detection of financial crimes facilitates the execution of criminals and fulfils the goals of anti-money laundering regulations.

• More Secure Financial Transactions

Real-time fraud detection can help make financial transactions safer. Banks and other financial institutions can use AML transaction monitoring software to swiftly detect, flag, and report fraudulent or otherwise questionable financial activities. It will help significantly reduce the likelihood that other bank clients would become the targets of fraud. Where anyone has fallen victim to such a scam, tracking the accounts involved becomes more accessible. Thus, financial institutions can see everything that happens by using transaction monitoring solutions.

• Quickly Report Suspicious Financial Activities

Anti-money laundering regulations demand firms reveal the identities of their customers who engage in suspiciously large financial transactions. For instance, Nigeria’s Special Control Unit Against Money Laundering (SCUML) must be informed of individual or company transactions over a certain dollar amount. Due to financial institutions’ high dealing volume, reporting suspected economic activity without transaction monitoring solutions for AML will take months.

Banks and other financial institutions use transaction monitoring tools for AML to discover and report suspected economic activities (Suspicious Transaction Reports) quickly and easily. This will make complying with the rules much simpler for them.

• Easy And Efficient Risk Management

When a business cannot quickly identify its risks, it can neither manage nor mitigate them. AML transaction monitoring software helps banks and financial organisations identify, assess, and manage business risks. In this manner, illegal economic activity cannot mistakenly seize their money.

• Boosts Customers’ Confidence and Trust

Customers are more likely to trust financial institutions like banks when they know their money is safe and can be recovered anytime.

AML transaction monitoring software is a significant factor in the users’ trust in the banking and financial sectors. AML transaction monitoring tools have tracked unlawfully shifted funds, alerting clients that financial dealings are not a mystery.

• Automates Processes and Reduces Operational Costs Of AML

Deploying and using transaction monitoring software for AML drastically reduces the time and resources that would have been needed for manual payment screening. In addition to eliminating human mistakes in transaction monitoring, increased year-end profits are expected due to decreased Anti-money Laundering (AML) operational costs.

Conclusion

Banks and other financial institutions are now responsible for tracking monetary transactions to detect, prevent, and report fraud.

When considering the daily transactions by banks and other financial organisations, however, it becomes clear that human labour to monitor transfers would be extremely taxing and time-consuming. Banks and other financial institutions will have less of a burden if they use transaction monitoring solutions for anti-money laundering.