The following article discusses in detail the importance of implementing monitoring of transactions in KYC and how firms can actively discourage financial crimes.
Transaction Monitoring Solutions: A Quick Insight
According to Markets & Markets research, the global transaction monitoring market size will grow to 16.8 billion dollars by 2023, showing a CAGR of 15.1% during 2018-2023.
According to the report, key market drivers behind the industry are:
- Increasing data protection regulations
- Lacking high-cost safety solutions in the payment network
North America & APAC Region
North America has the largest market share. Moreover, the APAC market is gaining traction because transaction monitoring services offer high security to prevent data privacy breaches. Organisations in the APAC region know the significance of monitoring of transactions in KYC and how effective solutions can discourage money laundering & terrorism financing.
Anti-money laundering protocols empower enterprises with tools that identify and deter abnormal monetary exchange activity. According to the latest guidelines, financial institutions must fulfil AML obligations while dealing with partner entities. Applying transaction monitoring solutions can discourage high-risk entities from taking advantage of the concerned enterprise. Moreover, as per counter-financing of terrorism protocols, companies can create customer profiling for effective risk mitigation at an industrial level.
KYT Compliance and monitors the monetary exchanges of clients. Some important financial transactions associated with user bank accounts include the following:
- Cash & card exchanges
- Cross-boundary transactions
- Trade finance exchanges
According to the latest standards, all banks and financial institutions must keep track of all monetary transactions, especially when third parties are involved. The information provides meaningful insights into the purpose and type of exchanges to identify abnormal activities and use data in further analysis. To accomplish the goal, several institutions design data models with various parameters such as customer name, country of origin and originating bank.
Monitoring of transactions in KYC is a type of data model that supports banks in observing monetary exchanges and highlighting suspicious activities. Experts can analyse bank data internally to highlight fake exchanges. The final output is solid evidence that safeguards enterprises from external attacks and hefty fines.
Using Monitoring of Transactions in KYC
All financial institutions must follow the latest know your customer & anti-money laundering requirements to deter fraud. Undoubtedly, there is coherence and uniformity in the data collection standards, but the procedure is still not internationally accepted.
For this reason, some jurisdictions have come up with rules to stick with requirements but other governments have given the power to local businesses to design suitable strategies. Unfortunately, some institutions still operate on manual procedures that are time-consuming and static in nature. Experts perform KYC & due diligence procedures but there are no follow-up sessions. This limits the ability to mitigate risk associated with a customer’s profile.
During the traditional onboarding procedure, specialists maintained customer records in paper form. This created a new challenge for financial institutions about how to perform Customer Due Diligence (CDD) while still offering a positive customer experience.
Technological innovation in financial companies has enabled experts to follow the latest KYC & AML requirements. Considering the market trends and the rising need for transparency, regulators are introducing more stringent regulations with time. This is important for the safety of investors and helps institutions to fight money laundering & terrorism financing cases.
In the above context, only the application of KYC will not be enough for fraud prevention. The implementation of monitoring of transactions in KYC must happen to ensure top-notch security.
Shifting towards Cashless Monetary Exchanges:
In the fourth industrial revolution, all businesses must opt for innovative digital solutions to maintain a competitive advantage. A shift towards cashless exchanges has happened and the crime risk has also increased. The application of monitoring of transactions in KYC can help experts actively deal with the above issues. This communicates growth, care & responsibility to all the stakeholders and potential customers.
Having multi-channel accessibility to modern-day firms, potential customers can easily benefit from financial institutions’ services. Nonetheless, there is bound to be a pool of fraudulent transactions within legit monetary exchanges. Monitoring transactions in KYC is a perfect solution for the above mentioned problem.
The Bottom Line
Using monitoring of transactions in KYC is a powerful approach towards fraud prevention. Cutting-edge technology has AI & ML support which facilitates instant detection of anomalies.
Collaborating with a verified vendor can help financial firms implement GDPR-compliant monitoring of transactions in KYC solutions. This guarantees a competitive advantage and maintains market credibility resulting in exponential growth.