How Real-Time Transaction Monitoring improves AML Compliance

Real-Time transaction monitoring is table stakes.

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It improves data privacy, prevents transactions from getting "stuck in limbo," and reduces the manual workload of compliance teams.

The path to effective real-time monitoring requires skills from two traditionally separate spheres: Fraud and Anti-Money Laundering (AML) compliance.

Sardine’s platform offers real-time by default and batch where you need it. That’s why fraud & compliance teams love us ❤

The two worlds of Financial Services Risk: Fraud and AML

Historically, the realms of Fraud and AML in financial services have operated independently, driven by different needs and goals:

1. Fraud Prevention: The primary goal here is real-time detection of potential fraudulent activities. Teams aim to detect and block any suspicious transaction or add an extra layer of verification before a transaction goes through.
2. AML Compliance: In contrast, AML operations focus on identifying intricate patterns of transactions and activities that could suggest coordinated illicit action by crime rings or sanctioned entities. This often requires analyzing transactions retrospectively, which might take days or weeks.

The consequence is different processes, teams, and priorities, each operating in silos.

The Benefits of Integrated Fraud and AML Operations

At Sardine, we've see that dismantling these silos creates a best-of-both-words scenario with two primary benefits: better data privacy and better handling of high-risk payments.

1. Privacy of Data: When potential fraud cases reach a certain threshold ($2000 in the US, for example), they must be escalated to compliance teams to file for a Suspicious Activity Report (SAR). If these teams use different systems, this data transfer might happen through non-secure or non-privacy-preserving channels, such as emails.
2. Managing High-Risk Payments: Suppose a customer sends a large wire transfer exceeding a predefined transaction threshold, triggering additional due diligence and document collection for customer risk assessment.
3. Without real-time transaction monitoring, the financial institution must receive the funds first. Then begins the cumbersome process of contacting the customer for supporting documentation. If the evidence provided falls short, the institution must initiate steps to offboard the customer. Meanwhile, the newly received wire transfer sits in limbo, causing both sender and receiver frustration due to the money being "lost in transit."
4. With real-time transaction monitoring, the system can decline the incoming wire transfer and return the funds to the sender. Simultaneously, the compliance team can request additional supporting documentation, significantly reducing friction and confusion.

Real-Time and Batch: The Best of Both Worlds

Despite the benefits of real-time monitoring, certain cases still require batch decisions. For instance, a rule that aggregates a user's transaction volumes for a calendar month and compares them to volumes across other users with similar profiles still needs complex SQL queries to compile transaction counts and volumes across various window functions.

However, an ideal system leverages real-time and batch capabilities, offering a more comprehensive, flexible, and effective solution.

The Imperative of Real-Time Transaction Monitoring

Real-time transaction monitoring isn't merely a good-to-have feature; it's a necessity for banks and fintechs that seek to improve their processes and maintain the highest standards of compliance and customer satisfaction.

By integrating Fraud and AML operations, financial institutions can leverage the best of both worlds and take a significant leap towards combating financial crimes more effectively.

With Sardine, you can :)