A Guide to Anti-Money Laundering for Crypto Firms

What is AML Transaction Monitoring?

Transaction Monitoring Knowledge & Training

Anti-money laundering transaction monitoring, also called AML transaction monitoring, allows banks and other financial institutions to monitor customer transactions on a daily basis or in real-time for risk. By combining this information with analysis of customers’ historical information and account profile, the software can provide financial institutions with a “whole picture” analysis of a customer’s profile, risk levels, and predicted future activity, and can also create alerts and generate suspicious activity reports. The transactions monitored can include cash deposits and withdrawals, wire transfers, and ACH activity.

AML transaction monitoring solutions can also include sanctions screening, blacklist screening, and customer profiling features.

The analysis is obtained primarily for the purpose of meeting various anti-money laundering (AML) and counter-terrorist financing (CFT) requirements, filing Suspicious Activity Reports (SARs), and fulfilling other reporting obligations. Certain Regulators around the world are making transaction monitoring a specific regulatory requirement, in New York State Part 504 does this as does the 4th Money Laundering Directive in Europe for high risk relationships.

How does AML Transaction Monitoring work?

  • Identify suspicious behavior and potential terrorist financing – at FI and end-customer level
  • Increase automation – minimize unnecessary alerts by tailoring scenarios to customer or transaction risk and focusing on regulatory priorities
  • Increase effectiveness over time – tune rules without tech support
  • Give regulators and banking partners confidence – ‘tried & tested’ system with a clear audit trail of CFT monitoring and investigations
  • Implement quickly, easily and securely – easy to implement REST API or batch file upload

AML Transaction Monitoring & Risk-Based Approach

Broadly speaking, a risk-based approach requires that financial institutions employ intensive measures (such as enhanced due diligence) to manage risk for clients or scenarios that are deemed higher-risk, while for lower-risk clients or scenarios, and where there is no suspicion of money laundering or terrorist financing, simplified measures may be permitted.

To apply a risk-based approach to AML transaction monitoring, countries, and institutions must take appropriate steps to identify and assess the risks of money laundering and terrorist financing for different market segments, intermediaries, and products on an ongoing basis. In line with the concept of a risk-based approach is acknowledgement that the nature and extent of AML/CFT controls will depend on a number of factors. The FATF, a global financial organisation that sets standards related to AML/CFT procedures, recognises the following factors as determinants of the proper extent of AML/CFT controls:

  • The nature, scale and complexity of a financial institution’s business.
  • The diversity of a financial institution’s operations, including geographical diversity.
  • The financial institution‟s customer, product and activity profile.
  • The distribution channels used. The volume and size of the transactions.
  • The degree of risk associated with each area of the financial institution’s operation.
  • The extent to which the financial institution is dealing directly with the customer or is dealing through intermediaries, third parties, correspondents, or non face to face access

 

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Originally published July 5, 2018, updated August 31, 2022

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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