Transaction Monitoring is a core tool in the ongoing fight against financial crime and is critical to ensuring AML obligations are fully met by financial institutions. Automated Transaction Monitoring systems have become a standard feature particularly of retail banks and are used to support the identification of suspicious transactions. They facilitate the processing of millions of transactions enabling banks to keep abreast of their customers throughout their relationship with the bank.

Typical TM systems employ rules which compare account, transaction and customer activity against defined thresholds or patterns, and when a customer or account breaches a rule an alert is generated.  These alerts are then reviewed and investigated by an individual.     

Given the criticality of automated TM systems, the more prevalent regulatory scrutiny and often the lack of senior management buy in (simply because they are not revenue generating systems), a project to implement a new TM system deserves some additional consideration above and beyond standard system implementations.  

  1. From the outset expectations need to be managed.  Typically a new system is thought to bring increased efficiencies and a subsequent reduction in head count.  The reality of a TM system can be quite different.  As the TM system will enable more customers and transactions to be reviewed, the workload will likely increase as there will be more potentially suspicious activity to investigate and follow up.  Resource demands may actually increase.  
  2. If you have opted for an off the shelf, out of the box implementation, do not be fooled into thinking this is a small matter of plugging it in and switching it on.  You will still need a project with dependencies on the right people from IT, data, the business etc to get the system up and running.  There will still be a need for configuration to enable it to work with your organisations data.  The rules themselves will need tuning and thresholds will need to be identified and agreed.  Inevitably there will be variations of the out of the box rules that you will prefer, and these will need more configuration.  The more configuration the more the timelines and budget will be impacted.
  3. Once the system is live do not underestimate the day to day management involved.  From ensuring the right data gets to the system on time, to tweaking existing rules and addition of new rules right through to alert generation, there will need to be various resources engaged on an ongoing basis to keep it going.  Securing the right level of IT support can be challenging, as often with these new specialised systems, IT resources won’t have worked with it before.  Being clear on continuity plans should primary IT resources leave the organisation is also essential.
  4. The system will only ever be as good as the quality and availability of your data.  Access to all the relevant fields for the different types of transactions, accounts and customers can be challenging depending on how the systems are structured, where the data is sourced from and who else uses the data.  The data analysis phase to identify the data at the outset of the project is so important to the underlying integrity of the system.  If you get this wrong, it will never matter how good your rules are as they will either be looking at the wrong data or the data they need will not be available.  
  5. Management Information and reporting are invaluable for managing the overall TM strategy.  Be clear on what is available within the system and ensure you have appropriate budget to cater for further reports and requirements.  Having commitment from the relevant data analyst team for provision of reporting capability is a good idea. 
  6. Governance and Ownership for the automated TM system needs to be clearly defined and agreed at the outset. Documenting the roles and responsibilities and putting in place the appropriate mechanisms (working groups/steering committees etc) for agreeing the rules and thresholds are essential for consistency and from an audit perspective. 

As you embark on your project to develop or enhance your TM capability understanding these additional project challenges as well as regulatory expectations will go a long way in creating a successful project.  

SQA Consulting can provide you with assistance in setting up your TM infrastructure from the implementation of the system, tuning rules right through to setting up the governance structures, processes and procedures and MI. 

Please contact us to find out more about this article, or review our TM brochure here.

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