September 30, 2021
Suspicious transaction monitoring systems give financial institutions the ability to watch over their clients' or customers’ transaction behavior. By providing current scenarios and/or rules that analyze the transactions, the monitoring system can alert institutions of suspicious activity that may be linked to money laundering or other financial crimes. Investigators then determine if these alerts are actually linked to unusual activity and if so, they will fill out suspicious activity reports (SARs) or another type of report for financial authorities.
Several financial institutions don’t re-assess the effectiveness of the alerts and whether or not there is a need to adjust the current threshold or even create new monitoring scenarios. This absence of tuning happens if:
The lack of intermittent scenario tuning frequently results in several false positives, which results in a delayed alert investigation. This ultimately results in missed reporting deadlines.
Financial institutions tend to face several challenges regarding consecutive scenario tuning.
The availability of alert investigation information isn’t obtained for use in future scenario tuning phases and even if the alert investigation information is obtained, it wouldn’t be in a data structure that works for data analyses or management information reporting.
In situations where the use for scenario tuning is identified, it is mainly concentrated on the problematic scenario/s at hand rather than in-scope scenarios, resulting in inconsistent performance of the scenario tuning process and ultimately won’t be maintained by consistent documentary evidence in case of regulatory scrutiny.
Only confirmed positive cases result in SARs being sent to financial authorities, meaning that it’s harder to tune the transaction monitoring system on solely the alert-to-SAR ratio in addition to measuring the overall effectiveness of the transaction monitoring system. Sufficient measurements of success include red flag coverage and as few criticisms of the transaction monitoring symptom by regulators as possible.
When connected to an anti-money laundering (AML) system, a systematic scenario tuning process gives a financial institution to get over the challenges listed above, and will ultimately help the system in the following ways:
If you are interested in learning about how Unit 21 can help your company with AML monitoring scenarios schedule a meeting today.