Transaction Screening & Transaction Monitoring: What It’s All About

In an increasingly connected and digitalized world, financial transactions are becoming more complex and faster. This not only brings advantages but also challenges. One of these is financial crime. Money laundering, fraud, and terrorist financing are just some of the risks that companies and financial institutions must manage. To effectively address these complex risks, specialized tools like Transaction Screening and Transaction Monitoring are essential. They play a central role in risk management and in complying with regulatory requirements.

What is Transaction Screening?

Transaction Screening is a key element in the Anti-Money Laundering and Counter-Terrorist Financing process (AML/CFT). It plays a significant role in a company’s fraud risk management. The primary goal is to detect risks associated with payments at an early stage. Before approving and executing a transaction, an in-depth review is conducted. All relevant information of the transaction is analyzed. This ensures that there are no indications of financial crime.

Transactions are specifically checked for the following risk factors:

• Money laundering
• Terrorist financing
• Fraud
• Evasion of sanctions
• Proliferation of weapons

Effective Transaction Screening should take place before the transaction’s approval and identify sanctioned entities. It must be based on current sanction lists and be well integrated into the company’s risk management. Analysts need clear risk insights to initiate effective measures.

What is Transaction Monitoring?

Transaction Monitoring is a crucial element in fraud risk management and the fight against money laundering and terrorist financing (AML/CFT). In contrast to Transaction Screening, which takes place before a transaction is approved, monitoring occurs after the transaction has been executed. The goal is the continuous monitoring of all customer transactions to identify unusual or suspicious activities.

As part of Transaction Monitoring, transactions are analyzed for various risk factors:

• Indications of money laundering
• Suspicion of terrorist financing
• Signs of fraud
• Potential violations of sanctions

An effective Transaction Monitoring solution ideally reviews already executed transactions in real-time. It should detect financial crime risks through rules and have access to other risk data. Analysts should receive clear data and context to act effectively. These factors are crucial for risk detection and regulatory compliance.

Transaction Screening and Transaction Monitoring: Two Approaches, One Goal

Transaction Screening and Transaction Monitoring are two indispensable tools to combat financial crime, but they have different application timings and focuses. Transaction Screening takes place before the transaction is approved and aims for early risk detection. Transaction Monitoring focuses on monitoring already executed transactions, ideally in real-time. Both processes use data analysis and can be rule-driven. They complement each other in that Screening wards off potential risks before the transaction, while Monitoring ensures security and compliance after the transaction.

Conclusion

Incorporating Transaction Screening and Monitoring into comprehensive risk management is crucial for effectively combating financial crime. These measures not only protect the integrity of the financial system but also help companies avoid regulatory penalties and maintain the trust of stakeholders.

Only through the combination of powerful technology and well-trained personnel can high-risk activities be specifically and efficiently identified. In this context, specialized and high-performance software solutions are crucial.

• Pythagoras Solutions offers a learning AML tool for anti-money laundering compliance in the area of Transaction Screening. This solution uses advanced algorithms to detect risks even before the transaction is approved.
• The Transaction Monitoring Tool from Pythagoras Solutions was developed for the plausibility analysis of transactions. This allows for real-time monitoring and analysis of already executed transactions.

Both tools are designed to increase the efficiency and accuracy of financial monitoring, thus ensuring compliance.

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