Real-time and offsite transaction monitoring are important tools in the fight against financial crime. Real-time monitoring provides immediate feedback and alerts for suspicious activity, while offsite monitoring allows for more in-depth analysis and investigation of potential financial crimes.
The two different ways of monitoring the transactions of customers will be discussed, including real-time and offsite transaction monitoring. Financial institutions use these monitoring processes to avoid ML/TF risks and identify suspicious transactions if they occur.
Real-Time and Offsite Transaction Monitoring
Real-Time Transaction Monitoring
Real-time transaction monitoring is a process of checking the detail of the transaction at the time of its occurrence. The institutions usually perform real-time transaction monitoring through controls built into the system.
Real-time transaction monitoring ensures that any suspicious transaction or activity is not processed or recorded in the system without appropriate review and investigation.
The real-time monitoring controls are based on different parameters, including the following:
- Transaction thresholds,
- Source or origination of transaction,
- Type of transaction,
- Purpose of the transaction,
- The beneficiary of the transaction, and
- Date and time of the transaction, etc.
System-built controls scan the detail of the transaction before processing. If there appears to be any suspicion or breach of any parameters requirements, the transaction is put on hold for review and investigation.
A compliance officer or any relevant person in the institution investigates unprocessed transactions shown in the system as a pop-up or alert. After review and investigations, the compliance officer processes or withholds the transaction. If the transaction is withheld, then relevant evidence is gathered from the customer whose account the transaction was supposed to be credited. Before processing a transaction, such evidence is reviewed and ensured whether the purpose, type, and source are legitimate.
In case there remain doubts after review and investigation. The institution may consider filing suspicious activity reports with the relevant regulator per the requirements of relevant AML/CTF laws and regulations.
Offsite Transaction Monitoring
Offsite transaction monitoring reviews transactions that have been incurred and recorded on the institution’s system. Offsite monitoring is a post-transaction activity to ensure controls embedded in the system and the employees processing and recording transactions follow the regulatory requirements and internal policies.
Offsite monitoring is usually performed by the compliance team, where the team visits different locations and branches and checks the employees’ work practices in those locations and branches. Offsite monitoring involves checking the history of the recorded transactions, interviews of employees responsible for processing and recording the transactions, observation, checking policies and procedures, etc.
Offsite transaction monitoring is also a system-based monitoring because all transactions are recorded in the system, which needs review and monitoring. The purpose of offsite transaction monitoring is to identify the control weaknesses, lapses, and gaps in the processes and systems that may lead to money laundering or other criminal activity.
The offsite transaction monitoring process is performed using the internal controls checklist, which consists of relevant transaction control checks that the employees who processed and recorded the transactions were supposed to be performed. Internal controls checklists cover the regulatory provisions and requirements covered under the internal transactions initiation and recording related policies and procedures.
After the performance of offsite transaction monitoring, a transaction monitoring report is prepared by the compliance team, which covers the internal controls deficiencies, suspicious transactions, and other issues identified during the offsite transaction monitoring process.
The offsite transaction monitoring report is presented to the higher management for review and feedback. Appropriate actions are proposed by higher management to the staff to ensure that the risk of money laundering and terrorist financing is avoided or managed promptly. The regulatory authorities may also ask for such reports while inspecting the institution’s compliance with applicable laws and regulations.
Real-time transaction monitoring is a process where transactions are monitored as they occur, providing real-time alerts or notifications for any suspicious activity. This type of monitoring is typically used by financial institutions, such as banks and credit card companies, to identify and prevent fraudulent transactions. Real-time transaction monitoring involves the use of advanced analytical tools and algorithms to detect patterns and anomalies in transaction data in real-time, allowing for swift action to be taken to prevent fraud.
Offsite transaction monitoring, on the other hand, involves the monitoring of transactions after they have occurred. This type of monitoring is typically used by regulatory agencies and law enforcement agencies to investigate potential financial crimes. Offsite transaction monitoring involves the analysis of transaction data, including transaction records, account balances, and other relevant information, to identify suspicious activity that may indicate financial crime.