Enhancing anti-money laundering measures is a central task for financial institutions, as it involves leveraging sophisticated techniques such as TBAML transaction alerts monitoring to detect and prevent illicit activities like money laundering, corruption, bribery, tax evasion, or potential terrorist financing.
The TBAML transaction alerts monitoring cannot be overstated when it comes to safeguarding financial institutions and detecting potential money laundering activities. All transactions including those initiated by trade customers, third parties, correspondent banking, or wire transfers must be monitored appropriately.
For trade transaction monitoring, the profiles of trade customers are used to monitor the transactions and activities undertaken by the customers; therefore, current and updated trade customer profiles must be maintained.
The trade transaction monitoring process includes a process of comparing customer-specific data with risk-scoring models. For high-risk category customers, transaction monitoring is a rigorous and detailed process, to identify the patterns of unusual or inconsistent transactions.
For trade transaction monitoring comparisons are made between the account activity volume and value and the historical transaction trend within the account of the customer. Account volume and activity are compared to a set of pre-defined thresholds and rules.
The variance of a trade transaction or activity from normal threshold or activity levels causes the generation of “alerts” which are scored and totalled at the account or customer levels. When a score crosses a defined score threshold, then the alert is generated for the review and investigation of the AML team. AML team focuses solely on studying and understanding transaction data and trends, to effectively perform the monitoring.
Enhancing Anti-Money Laundering Measures
Red Flags – Transaction Monitoring
All the activities and transactions that fall outside the expected customer activity or certain predefined threshold, should generate a “red flag” or alert, for review and investigation by the TBMLRO, in coordination with other relevant staff. TBMLRO must ensure that the red flag mechanism incorporates the possible trade financing risk factors considering the risk profiles of the trade customers.
Rules and transaction thresholds are set for trade transactions’ monitoring and the thresholds are marked in the system. Alerts are generated on the breach of the transaction thresholds or occurrence of unusual trade transactions, and the TBMLRO investigates such transactions and activity, in which an alert is generated.
Responses are sought from the customer on the generation of alerts and the satisfactory provision of information from the respective customer, the alert is marked as closed by the TBMLRO.
Transaction monitoring is an ongoing process performed by the TBMLRO through the defined monitoring processes and review mechanisms. Transactions or activities of the customers are also monitored through the trigger of the red flag or red alert.
Monitoring of a transaction or an activity, due to the generation of a red flag, is an event-based monitoring process. Such event-based monitoring is needed because of a breach of transaction threshold or irregular patterns of inflows or outflows, which may indicate the occurrence of money laundering, corruption, bribery, tax evasion, or terrorist financing risk incidents.
Trigger event monitoring of the trade customer relationship is likely to be based on a considered identification of transaction characteristics, such as:
The unusual nature of a trade transaction, such as abnormal size or frequency of the customer transaction or peer group
The nature of a series of trade transactions
The geographical destination or origin of payment, such as the origination of payment or transaction from or to the high-risk country
Certain high-risk indicators must be highlighted, reviewed, and investigated when the related activities and transactions fall outside the expected customer activity or the breach predefined transactions threshold. Red flags should be generated irrespective of the amount, customer type, and nature of the transaction.
The number of alerts generated within each bank varies based on several factors, including the number of transactions running through the monitoring system, as well as the rules and thresholds the bank employs within the system to generate the alerts.
A suspicious activity report is filed, after the investigation by the TBMLRO. Supporting documentation as to why the SAR is filed is maintained in the respective customer file.
Final Thoughts
TBML Reporting Officers (TBMLRO) play a crucial role in monitoring and detecting trade-based money laundering (TBML) activities. All transactions, including those initiated by trade customers and third parties, must be closely monitored. Updated trade customer profiles are essential for effective trade transaction monitoring. The process involves comparing customer-specific data with risk-scoring models and generating alerts for unusual or inconsistent transactions.
Red flags are triggered for review and investigation by TBMLROs, considering trade financing risk factors. The ongoing monitoring process helps identify potential money laundering, corruption, and terrorist financing risks. Suspicious activity reports (SARs) are filed after thorough investigations by TBMLROs. Their expertise is vital in protecting financial systems against TBML.
