Customer Scorecard in Transaction Monitoring

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Money laundering is a severe issue that financial institutions face, especially those that mediate a high volume of transactions. To prevent such crimes, institutions need to understand their risk levels and take necessary measures. One of the ways to achieve this is by using customer scorecards in AML transaction monitoring. These solutions help organizations determine their customers' risk levels by setting criteria such as annual income, job, age, and more. These criteria are then scored, and customers are assigned scores based on the stages of these criteria. By analyzing these scores, institutions can easily decide the necessary action steps. In this article, we will explore how customer scorecards work and how they can help institutions comply with AML regulations.

Understanding of Customer Scorecard in AML Transaction Monitoring

Customer risk assessment is crucial for fighting financial crimes such as money laundering. Institutions that facilitate numerous transactions must identify and mitigate potential risks to ensure compliance with regulatory requirements. Understanding the risk levels associated with their customer base is essential for financial institutions to develop effective risk management strategies.

One way to achieve this is through the use of a customer scorecard in AML transaction monitoring. By analyzing customer attributes such as job type, age, and income, institutions can assign scores to each customer based on specific risk criteria. These scores can then be used to trigger alerts with varying levels of urgency, such as low, medium, high, or critical. This enables financial institutions to take appropriate action steps based on the severity of the alerts received during the process.

How Does Customer Scorecard Work?

Customer Scorecard is a tool that helps you assess the risk level of your customers based on certain criteria that you define. To create the Scorecard, you can establish a set of criteria, such as annual income, account type, job, marital status, number of children, and citizenship, which fall under four main categories: Financial Details, Customer Details, KYC Details, and Additional Risk Factors. These criteria are just examples, and you can customize them to your needs.

Once you have defined your criteria, you can assign scores to each of them in the Score Card Fields. For instance, you may assign a score of 100 to a politician's job, 30 to a teacher's job, and 10 to a student's job. This way, you can determine the risk score of each customer, based on their information. By doing so, you can identify potential risks associated with each customer.

When you enter your customers' information, the Scorecard will generate a risk score based on your defined criteria and scoring. The Sanction Scanner AML Transaction Monitoring customer scorecards are dynamic and can be easily customized to meet the specific needs of your organization. By applying multiple criteria, you can get a better understanding of the risks associated with each customer and take appropriate measures to mitigate them.

Customer Scorecards for Risk Mitigation in Transactions

To better understand customers and potential risks associated with transactions, a customer scorecard profile is created for each individual using predetermined criteria such as job, married status, annual income, nationalities count, citizenship, and children accounts. The risk scores obtained from this scorecard are then included in the customer's profile and can be viewed across various sections such as customer details, accounts, transactions, and balances.

By using Sanction Scanner's intuitive user interface, this data can be easily analyzed to help evaluate and mitigate potential risks associated with transactions.

Suppose a bank wants to evaluate the risk associated with a potential customer's account opening request. The bank has determined the following criteria for their customer scorecard:

  • Job: 30 points
  • Marital Status: 100 points
  • Annual Income: 200 points
  • Nationalities Count: 100 points
  • Citizenship: 500 points
  • Children Account: 30 points (10 points for each child)

If the potential customer is a software engineer, married, has an annual income of €75,000, has dual nationalities (Italian and German), and has two children, the customer's total score would be calculated as follows:

  • Job: 30 points
  • Marital Status: 100 points
  • Annual Income: 200 points
  • Nationalities Count: 0 points (as dual nationalities count as one)
  • Citizenship: 0 points (as the customer is not a British citizen)
  • Children Account: 20 points (10 points for each child)

The total score for this potential customer would be 350 points (30+100+200+20), which is considered a moderate risk. If the customer had a higher score (e.g., 800 points), the bank may decide to investigate further or decline the account opening request altogether due to the higher risk associated with the customer's profile.

Using a customer scorecard provides a systematic approach to assessing risk and can help businesses make more informed decisions when it comes to dealing with their customers.

Advantages of Sanction Scanner AML Monitoring

Sanction Scanner AML Monitoring offers numerous advantages that set it apart from other similar products. One of its main benefits is its ability to monitor transfer transactions in real-time and stop them if a risky situation is detected, providing users with control. This real-time control mechanism helps prevent any potentially illegal activities from taking place. Additionally, alarms can be grouped based on their risk level, making it easier for users to manage and monitor their transactions.

Like many other features in the product, customization is also available for customers at different levels. Users can personalize their own rules and rule sets, apply different rules to different segments, change the risk level based on country or currency, customize scorecard thresholds for their customers, or personalize dashboard screens based on their firm's priorities. Furthermore, the product includes a feature that allows users to perform simulations of different scenarios in the past to compare the output of rules, which is useful for creating ideal rules and rule sets.

All of these features are presented through a user-friendly interface, making it easy for customers to navigate and use. Users can create their own rules with no-code and drag-and-drop methods, making it convenient for users with no technical expertise to use the product. Overall, Sanction Scanner AML Monitoring is a versatile and customizable tool that helps customers monitor and control their transactions effectively, ultimately protecting their business from potential risks. Request a demo or contact us to discover our aml solutions.

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