Role of Ongoing Monitoring in AML Compliance
A customer’s risk is never a “one-time snapshot.” Even after flawless onboarding checks, there are variaous risks that can emerge at any time. This is where the importance of ongoing monitoring comes into play. In this post, we will define what ongoing monitoring is in detail.
What Is Ongoing Monitoring in AML?
Ongoing monitoring refers to an AML process that helps obligated entities continuously review the activities of their customers and detect when unusual behavior comes up. Additionally, customers are simultaneously screened against Sanctions Lists, PEPs (Politically Exposed Persons) Lists, and Adverse Media to keep an eye on a possible change.
Why Is Ongoing Monitoring Essential for AML Compliance?
1. Detects Suspicious Activity Early
The earlier a business detects suspicious activity, more chance it has to mitigate it. With ongoing monitoring, businesses can detect abnormal activities as they occur and flag them. Moreover, this is one of the key steps to align with FATF (Financial Action Task Force) expectations.
2.Keeps Customer Risk Profiles Updated
A customer’s risk level may change at any time. Therefore, a successful onboarding does not guarantee it will stay that way. This is why ongoing monitoring is crucial. It ensures Customer Due Diligence (CDD) and Know Your Customer (KYC) data remain up to date by continuously updating profiles based on new activities, which is another crucial step in complying with what global regulatory bodies expect, such as FATF and EU AMLD.
3.Ensures Up-to-Date Sanctions & PEP Screening
Sanctions Lists, Politically Exposed Persons Lists, and Adverse Media Databases are frequently updated. As a result, periodic screening may not suffice for flagging newly sanctioned individuals and entities. Ongoing monitoring automatically captures new sanctions listings and reduces exposure to penalty risks.
4.Supports Regulatory Reporting Requirements
Another critical regulatory requirement is submitting suspicious activity reports. So, how does ongoing monitoring support this? It allows automatic triggering of suspicious activity reports and suspicious transaction reports (SARs and STRs) as well as maintaining an audit trail, including documenting customer history, risk changes, and compliance decisions.
5.Reduces False Negatives and Hidden Risks
It could be hard to spot subtle or evolving risks in manual and periodic reviews due to several tactics such as gradually changing behavior or using multiple smaller transactions to avoid detection. However, ongoing monitoring can reduce the chances of false negatives and improve detection accuracy by comparing behavior over time and recognizing anomalies relative to baseline activity.
6.Enhances Detection of High-Risk Patterns
As mentioned briefly in the previous point, fraudsters often resort to complex patterns to hide their actual motives. These can range from shell companies to layering transactions across accounts. Ongoing monitoring can allow businesses to detect these complex patterns.
7.Strengthens the Overall AML Framework
A lot can happen between periodic reviews and even the slightest delay could result in severe repercussions from financial penalties to reputational damage. Therefore, almost all AML authorities advocate taking a proactive approach rather than a reactive one, and ongoing monitoring is one of the pillars of this proactive approach.
8.Enables a Risk-Based Approach (FATF Requirement)
From OFAC to EU AMLD, all major AML regulators promote a risk-based approach for combating illicit purposes. With ongoing monitoring, businesses can obtain the necessary data to apply relevant measures depending on customer risk, product risk, or geographic risk.
How Does Ongoing Monitoring Benefit Organizations?
1.Lower Regulatory Risk
The lack of ongoing monitoring can result in severe penalties, enforcement actions, and reputational damage. Let’s give a recent example of what can happen when a business fails to conduct proper monitoring. According to Reuters, Ireland’s central bank fined a subsidiary of cryptocurrency exchange Coinbase 21.5 million euros for not properly monitoring 30 million transactions worth over 176 billion euros over a 12-month period. With ongoing monitoring, businesses can avoid these penalties.
2.Greater Operational Efficiency and Lower Costs
By tracking evolving customer patterns over time and adjusting the risk scoring accordingly, it significantly reduces the workload of your compliance teams. In addition to the lighter workload, it also reduces delays and human error. Of course, all of these leads to lower costs of operation.
3.Protects Organizational Reputation and Public Trust
Just a single incident is enough to destroy years of carefully built reputation, which is often far more dangerous than financial penalties. Ongoing monitoring helps protect brand image, build trust, and strengthen the organization’s credibility in the long term.
How Does Sanction Scanner Help with Ongoing Monitoring?
Sanction Scanner protects businesses by checking customers against Sanctions Lists, PEPs lists, and Adverse Media Databases continuously, which are updated every 15 minutes.
1.Sanctions Lists
There are more than 3,000 Sanctions Lists and Watchlists including United Nations Sanctions, US Consolidated Sanctions, OFAC - Specially Designated Nationals, Office of the Superintendent of Financial Institutions, EU Financial Sanctions, UK Financial Sanctions, Australian Sanctions, His Majesty’s Treasury List, and much more.
2.PEPs (Politically Exposed Persons) Lists
PEPs are not criminal, but they are considered high-risk regardless. Sanction Scanner collects and structures PEP data worldwide with AI support. Businesses can check their customers on global PEP data by name, ID number, or passport number, and get reports in seconds.
3.Adverse Media Screening and Monitoring
Businesses can perform Adverse Media checks via API, batch files, or the web through Sanction Scanner’s Adverse Media Software. This way, businesses can identify and protect themselves from financial crimes such as money laundering, terrorist financing, corruption, bribery, fraud, human trafficking, smuggling, or tax evasion.
4.Customize Your Automated Daily Ongoing Monitoring Process
Businesses can change the auto-scan frequency based on their customers’ risk levels. Furthermore, they can choose the data they want to scan their customers with, such as Sanctions Lists, PEPs Lists, or Watchlists. To summarize, it is up to the business to decide thresholds, risk levels, categories, and frequency.
5.Powerful Case Management
Nowadays, it is easy to get overwhelmed in complex interfaces suffering from too many details. Sanction Scanner allows you to manage your scans with Automated Daily Ongoing Monitoring, Case Management, and change the scanning frequency of a customer and view the results history.
6.Be Aware of Changes
We have mentioned a few times in the previous sections that changes can occur at any time and how important it is to track them. Sanction Scanner automatically reports when there is any change in the risk profile of the customers and reports this change to the relevant team.
7.Real-Time API-Based Monitoring
The Sanction Scanner API facilitates integration with onboarding, transaction, and case management systems, which allows for real-time screening as part of internal processes without disrupting current operations.
These are only a part of what we offer. If you are interested to find out more, do not hesitate to contact us.
