As part of these efforts, many institutions invest in software solutions that assist in detecting and monitoring patterns that could indicate money laundering within their transactional activity. Associated risks can be flagged during seemingly normal business activity, for instance, because of excessive cash usage, structuring and rapid movement of funds.
In order to identify the occurrences that demonstrate potential risk, institutions have to build profiling for clients, which is predominantly done via profiling of transactions and client data. Client data is processed and a risk assessment performed based on the Know Your Customer (KYC) tasks already carried out, as well as Customer Due Diligence (CDD) for all clients and an Enhanced Due Diligence (EDD) process that forms part of a deeper dive into the client data for those thought to represent a risk.
In this blog, Encompass’ Pre Sales Solutions Architect, Guy Sella, looks at the use case of transaction monitoring and explains how Encompass can help in prioritising alerts and speeding up investigations.
Transaction monitoring solutions are designed to analyse the transactions of a financial institution and detect patterns that might indicate activity related to money laundering. As mentioned, common patterns include structuring, circulation of funds, rapid movement of funds, and more.
Traditional transaction monitoring solutions provide an indication of potential money laundering in regulated financial organisations. However, they do have limitations when it comes to providing the full picture – primarily because a number of the patterns can be easily misidentified as money laundering (false positives).
Faced with this challenge, financial institutions struggle to provide evidence as to why cases were or were not reported, prompting regulators to question if they have ensured compliance across the board.
Confidence in evidencing appropriate compliance approaches cannot be achieved solely by transaction monitoring solutions – it requires additional information from various different sources.
Encompass’ solution provides an automated solution for KYC checks, and can provide the relevant information from multiple data sources which analysts need in order to assess the risk of a client.
KYC is mandatory in an overall AML policy, and the Encompass SaaS platform is capable of easily integrating with the financial institutions’ transaction monitoring solution, assisting analysts in making the best decisions.
Key components of our solution that make this possible include:
Our solution can look into existing alerts from a transaction monitoring system, and help determine if the alert might indicate suspicious information, such as associations, PEPs or sanctions, based on the entities involved in the pattern.
The Encompass SaaS solution can be integrated through a single API, which is connected to multiple data sources such as UBOs and Screening, thus enabling trusted data retrieval and KYC process automation.
Because of these features and more, Encompass can:
KYC characteristics can be a core factor in determining customer risk. If a suspicious pattern identified by the transaction monitoring solution meets a financial institution’s risk criteria, these can be assessed using data provided by risk relevant data sources provided by Encompass. If the client is at risk, in case the risk is high, the engine can make a decision on whether an alert should be created or not.
By using Encompass in this process false positives can, crucially, be reduced, having a significant impact overall.
On average, an analyst typically processes 20-40 alerts per day – most of them are false positives. Encompass’ solution can minimise the time it takes to re-check entities that demonstrate suspicious AML patterns, and save time during investigations by processing relevant documents in just a few minutes. This means the analyst can dedicate more time and resources to more business critical tasks, which ultimately increases productivity and profitability.
Encompass can indicate low risk entities in a few minutes, with the relevant documentation to the regulators being provided instantly. That means that analysts will dedicate a few minutes to a low-risk client investigation, and most of their time will be spent on the medium and high risk entities and cases that are not easy to determine.
Every regulated firm has to create and follow an AML policy that suits its needs, while being able to demonstrate how it tackles the subject of risk. Having a solution that can provide all necessary data for proper due diligence, while minimising human error, can help to set realistic targets, enabling the organisation to have greater confidence in achieving them, as well as promoting effectiveness and efficiency.
An efficient transaction monitoring system supported by an established KYC process can go a long way to ensuring the best decisions are made on each and every client, and this process is as robust as it should be.
Guy is an experienced presales solutions architect who helps financial institutions and law firms to identify process improvements and solutions for their KYC processes. Guy has been in the financial crime prevention industry for six years, working with a range of financial institutions in EMEA and APAC, including the likes of Citibank, GE Money and Standard Chartered.
Connect with Guy on LinkedIn.
Encompass’ intelligent process automation conducts live document and data collection, analysis and integration from public and premium sources to bring transparency to complex corporate structures and ultimate beneficial ownership, delivering the most accurate and complete KYC on demand.