An Overview of the Transaction Screening Process


Transaction screening is a process of evaluating financial transactions in real-time to monitor the customers’ transaction activities. As a part of AML processes, financial companies use this screening system to verify customer identities and monitor ongoing transactions.

A manual transaction screening is both time and resource-consuming. Therefore, businesses and financial institutions utilize automated transaction monitoring systems to screen high volumes of transactions. Customers are screened against global sanction lists to ensure transparent transaction activities.

Why Suspicious Transaction Monitoring?

As per the latest reports issued by the UN, $2 trillion is laundered around the world. Nearly 90% of the criminals are detected and prisoned, however, a vast range of money laundering activities go unnoticed. That’s where suspicious transaction monitoring comes in to help businesses and the financial sector in the detection of illegal financial activities.

Benefits of Transaction Screening

The aim behind transaction screening is to track and curb illegal financial activities. Monitoring of transactions ensures the safety of businesses and financial institutions, offering following benefits to the financial bodies:

  • Helping fiscal bodies detect illegal financial activities quickly.
  • Acceleration of the remediation procedures.
  • Assisting financial institutions to meet the regulatory requirements.
  • Detection of suspicious transactions and further investigations.

Challenges in the Implementation of Transaction Screening System

Regardless of its unmatched benefits, the transaction screening system has several challenges leading to certain complications. If left unattended, ineffective transaction screening systems can leave loopholes for criminals to exploit. Some crucial challenges businesses may face are:

  • Different Regulatory Standards

In order to prevent continuously changing and increasing financial criminal activities, regulatory requirements need to be changed. Frequent update of transaction monitoring systems is mandatory to ensure smooth transition activities.

  • Poor Configuration System

A well-configured transaction screening system always tends to be more effective and efficient. In order to achieve success, it is necessary to coordinate third-party data such as watchlists and government databases. However, it is important to address errors in implementation to ensure a successful configuration of the system.

  • Need Constant Maintenance & Update

Criminals often use advanced methods in order to prevent the detection of their suspicious transactions. Therefore, a smooth and efficient transaction monitoring system needs constant updates and maintenance.

Red Flags a Company Should Look for During Monitoring of Transactions

During suspicious transaction monitoring, the primary red flags that every company should be aware of are as follows:

  • Multiple off-shore and foreign bank accounts of clients.
  • Vast amounts of money transferred or received from sanctioned countries.
  • Hidden sources of money indicating the evasiveness of client.
  • A startup making huge transactions without a valid reason.
  • Huge payments are being made to a same entityafter a regular time interval.
  • Inadequate information about clients may indicate transactional activities under fake names.

KYT(Know Your Transaction) & Transaction Screening

Know Your Transaction (KYT) is a procedure employed by enterprises and financial institutions to track financial activities for the detection and prevention of criminal activities, for instance, financial terrorism or money laundering.

Therefore, the KYT process holds an integral position in the transaction screening system to ensure the credibility of businesses and financial institutes.

How KYT Works in Transaction Screening?

The goal behind KYT (Know Your Transaction) is to monitor and keep track of clients’ financial activities in order to identify suspicious transaction activities. It involves the following steps:

  • Data Collection

Businesses and financial companies have to collect customer data from various sources, including user provided data, government-issued IDs, and transactional data.

  • Risk Scoring

Risk scoring is done after the analysis of collected data. The process of risk scoring is based on some primary factors, which include the nature of transactional activities and the geographical location of such activities.

  • Constant Monitoring

With the help of machine-learning algorithms, constant monitoring helps businesses identify and detect suspicious transactions through unusual patterns.

  • Investigation & Reporting

If a transaction is flagged suspicious during the transaction screening process, investigation to ensure the legitimacy of that particular transaction is mandatory. However, if the transaction is found suspicious, reports must be submitted to the relevant authorities, such as CFT and AML regulations.

The Bottom Line

Transaction screening is important in the financial industry as a part of anti-money laundering (AML) processes. The process involves real-time evaluation of financial transactions to monitor customer activities. By screening users against global sanction lists, financial institutions work to detect and prevent financial abnormalities. Transaction screening offers benefits, for example, instant detection of suspicious transactions, assistance in meeting regulatory requirements, and acceleration of remediation procedures. To enhance transaction screening, the integration of Know Your Transaction (KYT) procedures is crucial. However, the incorporation of such robust screening practices allows businesses to enhance their ability to detect and deter risks associated with financial transactions effectively.


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