Transaction monitoring refers to the monitoring of customer transactions, such as transfers, deposits and withdrawals, in real time or after they have been processed by a bank or financial institution. Transaction monitoring is an important part of a robust financial crime compliance programme: not only does it help to detect patterns of suspicious behaviour, it also provides a complete view of customers’ activity, including customer risk levels and predictions of future behaviour.

Just like in Philip K. Dick’s “The Minority Report” novel, transaction monitoring, among other things, uses predictive mechanisms to detect and prevent crime before it happens by uncovering “red flags” in the past transactions and analysing the patterns in customer data. Unlike in the dystopian universe, Salv uses dynamic rules-based transaction monitoring with multiple conditions to identify bad behaviour and minimise risks to your business.

Your approach to transaction monitoring should include the development and implementation of comprehensive transaction monitoring rules that cover all risks specific to your industry and your business. This blog aims to give you a better understanding of transaction monitoring rules: how you can create, change, and test transaction monitoring rules, relieve pressure on your compliance team, and take your transaction monitoring to the next level. With Salv, you can do all of this – and more.

Before we go any further, let’s cover the basics of transaction monitoring.

What is transaction monitoring?

Definition of transaction monitoring

Transaction monitoring helps organisations to recognise and understand patterns of potentially criminal behaviour, stop suspicious payments, or analyse them post-payment. Different types of transaction monitoring are used to improve the accuracy and speed of the enhanced due diligence (EDD) process, detect and prevent fraud, and analyse transactional data to detect money laundering.

Types of transaction monitoring

Who benefits from transaction monitoring

Transaction monitoring is a mandatory process for any organisation that must be supervised for money laundering purposes. In addition to the obvious, such as banks and financial institutions, the list includes money services businesses (MSBs), payment service providers (PSPs), virtual asset service providers (VASPs), digital banks, including neobanks and challenger banks, and many more.

Institutional risk assessment and individual customer risk profiles must be taken into account in order to meet anti-money laundering (AML) and counter-terrorist financing (CFT) requirements and fulfill monitoring and reporting obligations. In its guidance for a risk-based approach for the banking sector, Financial Action Task Force (FATF) recommends that a bank should have a monitoring system in place that is adequate with respect to its size, its activities and complexity as well as the risks present in the bank.

You don’t have to stand alone against financial crime. Improve the quality of suspicious activity reports (SARs) and reduce investigation time with fincrime intelligence sharing.

Why is transaction monitoring important?

Challenges in the existing transaction monitoring landscape

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Financial criminals are fast: they have the latest technology, unlimited freedom and resources to stay one step ahead of law enforcement efforts. Compliance teams need more time to investigate and prevent money laundering, more often than not, they are understaffed, bogged down by innumerable regulations. But that’s not all there is to it. When it comes to transaction monitoring, organisations face even greater challenges, in part due to:

Balancing the challenges of maintaining compliance and fighting financial crime, while providing the best experience for your customers will give you more meaningful control over your organisation. But if you really want to stop crime from happening and catch criminals when it does happen, your compliance team must have access to the latest tools and technology.

The role of transaction monitoring systems

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Transaction monitoring is more about detection and less about prevention: you can’t prevent crime without detecting it. Informed transaction monitoring choices must be a cornerstone of your financial crime compliance programme. With an effective transaction monitoring system in place, you can:

The key to a successful transaction monitoring system is to constantly monitor, keep track and respond to the threats your organisation and your customers face. You must be aware of the industry-specific risks, identify the weak points in your systems and processes, including your product’s potential vulnerabilities – in order to overcome them. This will provide you with valuable information and insights, and guide you to create effective and efficient transaction monitoring rules to capture all possible risks and threats and stay on top of your game.

We are stronger when we are together. The key findings from the AML Bridge Estonia pilot show that collaborative crime-fighting is not only possible but essential.

What are transaction monitoring rules?

Definition of transaction monitoring rules

Many organisations use transaction monitoring to simply tick the boxes. But if you really want to tackle money laundering and financial crime, you need to build your own library of transaction monitoring rules. Your rules must cover specific money laundering typologies and target your organisation’s particular risks and vulnerabilities. Whether you are an early-stage startup or an established enterprise, Salv can help you to quickly set up and upgrade your transaction monitoring system. See our transaction monitoring rules in action.

Transaction monitoring rules focus on capturing suspicious patterns in deposits made to personal and business accounts, as well as money transfers and withdrawals. When set up properly, transaction monitoring rules run through the aggregated transactional data, flagging suspicious transactions for analyst review. With transaction monitoring rules, you can do so much more than just tick the boxes. You can really fight financial crime and win.

What you can do with transaction monitoring rules

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With transaction monitoring rules that accurately capture your organisation’s known and potential risks, you can:

Benefits of transaction monitoring rules

Extensive transaction monitoring rules that encompass a range of complex scenarios can work wonders to bring down the number of false positives, detect patterns of crime, and reduce the workload for your compliance team. Transaction monitoring rules act as a safety net giving you the confidence to stand your ground and fight crime more effectively: you can track irregularities in your customers’ behaviour, as well as their customers’ and counterparties’ transactional history. With Salv, you can create custom rules from scratch with zero engineering effort.

Counterparty data is not usually available to organisations, but Salv collects it automatically. This is how counterparty monitoring works at Salv.

Unlike artificial intelligence (AI) and machine learning (ML), transaction monitoring rules are very easy to understand and implement, because they rely on the logic that is hard-coded to specific transactional patterns based on the known money laundering typologies. With dynamic rules-based transaction monitoring, you can control the output by introducing new features to better explain the data. You can communicate transaction monitoring rules in simple terms to legal professionals, external auditors and regulators.

Criminals never cease their efforts to evade the law: the moment they recognise the traps you laid for them, your transaction monitoring rules lose their edge. To stop criminals in their tracks, you must constantly change your transaction monitoring rules.

If everyone else is jogging, you must be sprinting ahead in the global race against crime.

How do transaction monitoring rules work?

What types of data we process

Salv processes personal data, transactional data and non-transactional data, or metadata. You can use know-your-customer (KYC) data, risk and screening results to create and test better transaction monitoring rules. As long as you have a coherent and consistent dataset that provides a solid base for the analysis, it’s safe to say, you are set up to succeed.

What types of rules you can create

With Salv, you can create rules for real-time, post-event and periodic transaction monitoring checks. Real-time transaction monitoring rules empower you to stop fraudulent transactions when they occur by giving you a real-time API response. If you don’t need to suspend a customer or payment, and there is no other business logic triggered, it’s often best to use post-event transaction monitoring rules. They don’t require a separate monitoring check API call: all the calculations are done after the data is uploaded to the Salv platform. Instead of being triggered by new data uploads, periodic — sometimes called interval — scenarios run continuously after the time interval you define.

With Salv’s transaction monitoring rules you can monitor high value payments, payment frequency, velocity, counterparty count, dormancy, and more. You can monitor your customers, including natural persons, legal entities, merchants, the end customers of your customers, and counterparties. You can do so much more – with one convenient solution.

How transaction monitoring rules work

Whenever you see something strange or suspicious, you can write a rule to capture and investigate it, detect similar patterns in the future, and make sure that the same thing doesn’t happen again. The process is fairly simple: you collect the input, create a rule, validate the syntax, test the rule on historical data, and implement it into the production environment. At Salv, we currently support two languages: SQL and JMESPath, intuitive and powerful query languages that are easy to grasp and start using from day one.

The more transaction monitoring rules you have, the greater your chances of detecting the patterns that may have previously escaped your attention. Salv’s customers don’t have to create everything from scratch (although that is also an option): we have a growing library of transaction monitoring rules, with 100+ rules being used daily by dozens of our customers. At Salv, we regularly generate more combinations and update our library with new granular rules. Each rule is a template that can be easily adjusted for your organisation’s risk factors.

With Salv, you can set up certain thresholds depending on the risk levels of your customers. Salv’s risk scoring tool allows you to pinpoint higher-risk customers and incrementally increase efficiency over time.

How does transaction monitoring work at Salv?

We don’t give you a tick-box solution. We want you to be on top of your game to beat financial crime and move the industry forward. At Salv, we created a complete toolkit for your organisation, to use your compliance knowledge and experience for the benefit of your customers and help you to become better at what you do.

With Salv, you can use a custom logic to generate alerts and create transaction monitoring rules in a very flexible way, with no limitations, no right or wrong, and a freedom to build and explore. You don’t need a deep technical understanding or engineering experience: test and adjust the rules as you like. We’ve got you covered. See our transaction monitoring in action.