Transaction Monitoring System – Tool for Safer Financial Transactions

KYC AML regulations

The monitoring of most online systems is vulnerable to online risks and fraud as the digital platforms are not fully secure for high-risk transactions worldwide.  A number of crimes have been reported in the past years that include online banking platforms and digital means of transactions. 

In the past years, the banking sector has faced various new threats which breach the transactions and use the client’s data to process illegal transactions for money laundering and thefts among various industries. Research shows that over 250 million people are subjected to online theft and transaction stealing in 2020.

Multiple Authorities have advised making the transaction monitoring process obligatory in most business processes. According to the FATF (Financial Action Task Force), all the banking sectors and financial institutions must produce a transaction monitoring system for assessing the risks associated in high amount transactions by applying deep analysis techniques.

What Is The Transaction Monitoring Process?

The transaction monitoring system as the name suggests is a process of evaluating transactions and detecting the loopholes involved in the methods of online transaction systems. It monitors customers’ withdrawals, deposits, and transfers to gather suspicious activities within the system that can lead to major crimes of money laundering and theft.

Transactions that are monitored are marked as red flags that may include risks of fraud and are inspected further by the transaction monitoring system for flaws and risks. The Transaction monitoring system complies with KYC AML regulations for checking all the possible nodes to prevent thefts and online fraud.

AML Transaction Screening Process

Several industries can conduct multiple AML screening processes for the evaluation of customer transactions. The AML laws according to the Banking Secrecy Act 1970 are followed by major banking systems to process transactions and screen different businesses for major checks and balances. The AML screening is performed at initial levels of onboarding of businesses and firms online.

It depends on many factors of the business by which a transaction is performed. Some of the major factors include:

  • Size of the business and the business complexity

This provides a piece of brief information on the business scale in the market and the levels of transactions it performs in most situations.

  • The Geographic Reach of the Business

The business’s geographic reach can affect the transaction monitoring system to use more resources in determining the risks involved in the transactions.

  • Profile of the Business and its Associated Partners

This factor is major as it ensures the business profile and all its intermediaries screening to make sure the money transfer cycle is secure.

  • Risk Assessment of other terms

The transactions monitoring system also processes the risks associated with the business transactions that may interfere in the cycle of successful transactions. Some of the major risks include unverified transactions, unverified clients, and unverified business entities.

Transaction Monitoring Approaches

The Transactions are if several types and multiple approaches are used to monitor specific transactions of businesses. Most financial institutions follow the AML transaction monitoring approaches to verify the customer or the business. Some of the Major transaction monitoring approaches that verify transactions are:

Tagging Transaction for Tracing at Different Times of Transaction

Tagging transactions such as adding headers to various nodes including unique identities and other elements to trace the transaction at each hop of the transfer cycle.

Central Management Database Mapping

This approach is used to analyze the history of transactions performed by the business to identify the patterns of previous transactions. This technique helps in pattern processing which helps in determining the risks of transactions.

Analyzing Flow of High-Risk Transactions

The pathway is analyzed by which the transaction is initiated and completed. The whole flow is used to process the data of the transaction performed. It ensures the complete components sample analysis and their interactions between them.

Manual Debugging Transaction Monitoring Solution

This technique is the same as profiling business entities, in this strategy each transaction is deeply analyzed by several profiling tools and kits.

Re Assembling of Transactional Packet Data

The transactional data is decomposed into several packets resulting in better analysis and deep processing. It is then reassembled after monitoring transactions in real-time.


The Transaction monitoring system is used by the banking sector as a major processing unit for the AML laws. It prevents money laundering and scamming online by verifying the transaction and its procedure. The AML laws are followed when processing different business transactions for evaluation. The Transaction monitoring system also works on a KYC check to verify the identity of the business which performs financial transactions, The identity verification process is the key process of every known customer transaction processing system. Major authorities such as FATF and JMLSG (Joint Money Laundering Steering Group) have made it a must to perform due diligence at different levels of transaction processing across the Globe.

Also Read: What are the Types of Cyber Security Threats?

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