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Transaction Screening System: Fighting Money Laundering in Financial Firms

Software integration issues, outdated systems, and traditional Id verification procedures are major issues that financial firms face. To deal with the problems, IT experts are introducing innovative digital solutions to facilitate industries. Cutting-edge solutions can facilitate banking service providers by streamlining onboarding procedures, performing due diligence, and screening user data against multiple watchlists.

Nowadays, financial institutions need to keep track of monetary transactions and the units of data in the exchanges. Businesses must maintain a record that will help later on in auditing or AML checks. The application of a transaction screening system can help financial businesses to discourage money laundering and maintain records of monetary exchanges.

Transaction Screening System: A Quick Overview

Know your transaction solutions validate and keep track of users’ monetary exchanges to discourage money laundering attempts instantly. Following are essential financial exchanges that consumers often perform:

  • Cash & Card-based
  • Cross-boundary
  • Remittances
  • Trade finance exchanges

All financial service providers must keep track of important details, particularly when third-party vendors are involved. User exchanges have meaningful insights into consumer behaviour, highlighting the transactions’ purpose and nature.

This is important to highlight fraudulent exchanges and use the information for further data analyses. To accomplish this objective, financial institutions must implement a transaction screening system to record full customer name, country of origin, and user’s originating bank.

Know your transaction screening services are a data model that observes financial exchanges in real time to deter money laundering & terrorism financing cases. Experts can perform data analysis on bank details internally to detect suspicious activities. The output can serve as strong evidence that discourages bad actors while facilitating compliance with KYC & AML regulatory exchanges.

Market Potential of Transaction Screening System

According to Market & Market research, the industry size of the transaction monitoring sector was around $8.3 billion, which will exponentially grow to $16.8 billion by 2023, displaying a CAGR of 15.1% for 2018-2023.

The key factors that will grow the market are below:

  • Ensuring KYC compliance
  • Fighting Money Laundering
  • Combating Terrorism Financing
  • Using advanced analytics to manage risks

Some of the important vendors are Oracle & FICO from the USA, Experian from Ireland and several others. North America accounts for the massive growth during the forecast period. The aforementioned critical factors will drive growth in North America. Moreover, the APAC market is also growing because the transaction screening system offers unbeatable data security. Financial firms in APAC want to implement the know your transaction solution to gain a competitive advantage in the market.

Significance of Implementing Transaction Screening System

According to the latest regulations, financial firms must follow given guidelines to discourage fraud and attract genuine customers from worldwide. The set standards have coherence but still do not qualify as international protocols. Some jurisdictions have well-defined rules and procedures, but other governments have given the responsibility to local businesses to design effective strategies.

In modern times, several organisations still operate on outdated approaches, which decreases the efficiency of KYC & due diligence procedures. This way, professionals do not update information through follow-up sessions. This increases the risk of money laundering & terrorism financing cases drastically. In this scenario, banking firms & other financial institutions face challenges while conducting due diligence procedures & offering a positive customer experience.

Financial firms can easily ensure compliance with KYC & AML regulations using innovative digital solutions. Keeping in mind changing market trends & need for transparency from users, legislators are introducing stringent standards to discourage money laundering. The purpose is to protect investing bodies and facilitate service providers to attract genuine customers.

In the modern world, there is something more than the application of know your customer solutions required. The implementation of a transaction monitoring system has become critical to deter fraud and ensure a positive customer experience.

Using Transaction Screening System with Risk-Based Approaches

Financial firms must perform the following steps either experts want to build a personal KYT system or collaborate with a third-party vendor:

Applying a Risk-Based Approach

Financial businesses must carry out effective risk assessments on onboarding clients to discourage money laundering and terrorism financing cases. The risk score can change depending on products and services, frequency & nature of financial exchanges. For instance, in case of high-risk customers, financial companies can easily perform enhanced due diligence conveniently.

Identifying Suspicious Activities:

All financial service providers must use the transaction monitoring system to highlight red flags in monetary exchanges. Identification of red flags also depends upon the size & type of company.

Cutting-edge transaction screening system can identify red flags & notify staff members in real time.

Concluding Remarks

The implementation of a transaction screening system can facilitate experts to keep track of monetary exchanges and discourage fraud. Undoubtedly, some fraudulent exchanges exist within a pool of legal financial transactions. This can result in non-compliance with KYC & AML regulatory obligations, which incurs hefty fines. The state-of-the-art transaction screening system can protect modern–day organisations from serious repercussions from international regulatory bodies.

Financial firm experts can collaborate with a third-party vendor to implement a transaction screening system that is GDPR-compliant. The AI-driven solution can help clients identify anomalies in real-time.

IEMLabs is an ISO 27001:2013 and ISO 9001:2015 certified company, we are also a proud member of EC Council, NASSCOM, Data Security Council of India (DSCI), Indian Chamber of Commerce (ICC), U.S. Chamber of Commerce, and Confederation of Indian Industry (CII). The company was established in 2016 with a vision in mind to provide Cyber Security to the digital world and make them Hack Proof. The question is why are we suddenly talking about Cyber Security and all this stuff? With the development of technology, more and more companies are shifting their business to Digital World which is resulting in the increase in Cyber Crimes.


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