The digital transformation of business operations has expanded the concerns regarding money laundering, terrorist financing, and cash smuggling procedures. These operations exploit the financial institution’s ability to monitor and prevent the consequences related to such attacks.
Therefore, financial institutions must implement secure transaction monitoring measures to circumvent the threats related to cybercriminal activities in real-time. The automated KYC ensures a thorough analysis of customers’ transactional and financial activities, which facilitates the assessment of their risk-profiles.
Read this blog to further understand the concept of automated KYC check and evaluate how these operations regulate the financial structure and customer’s transactional activities.
Automated KYC in Transaction Monitoring – A Brief Overview
The financial institutions are vulnerable to recurring money laundering and account takeover attempts. These practices create hurdles in the detection and prevention of fraudulent activities among financial institutions. Therefore, automated KYC has emerged as a detection framework with the aim of countering money laundering attempts as they occur.
Automated KYC facilitates an effective recognition of the suspicious activities that the imposters undertake to exploit the financial framework. Moreover, the increase in remote transactions requires extensive authentication checks to validate their source and origin in real-time.
Importance of Fintech Transaction Monitoring with Automated KYC Solutions
Automated KYC facilitates the identification of remote banking operations as it can effectively evaluate the nature of transactions being made through online channels. Therefore, automated KYC operations are applicable in the fintech sector due to their automated services. Some of the crucial reasons that show the importance of transaction monitoring are discussed below:
- Automated KYC ensures instant fraud detection and prevention measures, which protect businesses from exploitative financial threats and risks.
- Know your transaction regulations assure effective risk management operations, which enables the examiners to examine the pattern of transactions in real-time.
- Fintech transaction monitoring satisfies the AML compliance operations in the fintech sector, which prevents the consequences relative to non-compliance fines.
Explaining the KYC Process in Transaction Monitoring
KYC, short for Know Your Customer, automates the tracking and monitoring of financial transactions by identifying the client identities. Compliance with these regulations ensures the authenticity of the automated KYC operations. There is a process under KYC that is KYT.
A streamlined KYT process encompasses the following steps:
- The customer transactions monitoring process begins with the acquisition of their financial documents through legitimate databases.
- Through the evaluation of these databases, unique risk scores are assigned to each customer to categorize potential customers into high and low-risk entities.
- In the next step, the customers’ transactional data is monitored to flag unusual financial operations in real-time.
- After highlighting the irregular transactional activities, they are screened against several criminal watchlists to investigate their contribution to illegal activities.
- Lastly, all the evaluated information is secured in the financial databases. Moreover, the malicious transactional activities are reported to the SAR department.
Top 5 Aspects of the Transaction Processing Cycle That Demands the Assistance of Automated KYC
The automated KYC comprises 5 aspects, ensuring a streamlined financial processing operation. These steps are:
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Data Research
Lastly, the transactional activities are thoroughly analyzed and inquired against criminal watchlists to prove their legitimacy.
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Data Input
Customers’ transactional data is extracted and captured through OCR scanning. It allows the examiners to identify all the alterations and modifications made for money laundering attempts.
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Database Processing
The processed information is then compared with the ID credentials stored in the official government databases.
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Informing
The transaction processing cycle continues with the reporting of illicit transactions to the higher authentication authorities that use the processes of automated identity verification.
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Fund Transaction Processing
Financial transactions are then processed through automated batch screening modules.
Factors Raising the Demand for Automated KYC Monitoring of Transactions
The concerns regarding the recurring money laundering attempts and growing false positives has raised the demand for businesses to adopt transaction monitoring operations.
These procedures are beneficial not just to financial institutions, but they are also linked exclusively with other business sectors as well. Additionally, transaction screening ensures transparency in financial activities.
Future of KYC Automated Solutions in Financial Transactions
Transactional monitoring operations are backed by the latest AI and machine-learning modules, which streamline suspicious transaction patterns in real-time. Moreover, automated KYC modules are encrypted with blockchain technology, which stimulates financial record-keeping and tracking operations.
Furthermore, transaction monitoring algorithms facilitate the cryptocurrency market in tracking and identifying criminals’ illegal activities. The crypto market highly relies on KYC process operations due to the increasing trends of ever-evolving financial crimes.
Winding Up
Automated KYC encompasses a streamlined process that tracks the pattern of transactional activities as they occur. These procedures protect businesses from illegal financial activities due to real-time data examination operations.
Furthermore, knowing your customer compliance stimulates the efficiency of the transaction monitoring procedures as it ensures the screening of customers’ previous financial activities instantly. Therefore, financial institutions must invest in automated transaction monitoring measures to regulate their functionality. Online transaction screening operations are essential for the stimulation of risk-free transaction operations.
