In today’s digital age, cases of money laundering and terrorism financing are increasing with time. As per the statistics shared by UNODC, the approximate amount of money laundering in a year is around 2% to 5% of global GDP, from $800 billion to $2 trillion. Specialists want to implement the latest digital solutions to combat financial crimes. Applying know your transaction systems can facilitate experts to fight fraud and ensure compliance with KYC & AML regulatory obligations. This innovative approach will not only secure a strategic advantage but also strengthen customer relationships.
The following articles looks closely at the significance of KYT know your transaction systems. Moreover, the blog discusses how businesses can implement cutting-edge solutions to fight money laundering & terrorist financing cases.
KYT Know Your Transaction Solutions: A Brief Overview
Transaction monitoring is a foolproof procedure that allows banks and financial institutions to monitor clients’ activities to identify and discourage high-risk transactions. It considers customers’ backgrounds and financial profiles to assess risk levels and make necessary predictions. The AI-driven systems show results in real-time and generate Suspicious Activity Report (SAR) and send it to regulatory authorities.
Global authorities keep updating the compliance framework to keep up with the latest market trends and close the loopholes in protocols. One major pillar of the compliance process is KYT know your transaction solution. The advanced systems provide critical analysis to highlight suspicious monetary transactions. The state-of-the-art solution links customers’ profiles and investors with transaction activity. This way, businesses can fight money laundering and terrorism financing cases actively.
As per Markets & Markets research, the global transaction monitoring industry will reach a financial worth of around $16.8 billion by 2023, showing a CAGR of 15.1% from 2018 to 2023.
North America will have the largest market share during the given predicted period. North American region followed by Europe will become the most significant revenue-generating jurisdiction for the predicted time. Moreover, the APAC market is gaining traction because transaction monitoring services play a vital role in preventing data privacy breaches. In the APAC region, SMEs & large enterprises have become aware of the benefits of KYT process to discourage financial crimes.
Four Stages of KYT Know Your Transaction Procedures
Technological innovation has enabled fraudsters to commit financial crimes by using sophisticated approaches. This requires the application of new interventions such as KYT know your transaction. The following sections discuss various stages of the system in detail:
Phase 1: Identifying the Customer
In order to form strong business partnerships, financial institutions must implement the latest rik-assessment frameworks and customer due diligence regimes. This is vital to follow the latest AML/CFT guidelines. The innovative approach must calculate risk associated with each client’s profile and keep financial firms updated regarding customers’ activities.
Phase 2: Applying a Risk-Based Approach
The second phase of KYT know your transaction services is about executing risk-based calibrations where financial firms must set up suitable parameters according to the needs of organisations. Experts must perform frequent back-testing to analyse historical data for accurate predictions. Likewise, Financial Institutions (FI) must perform data integrity checks to ensure accuracy of information. Such measures enable the detection and examination of all abnormalities and mistakes negatively impacting data integrity.
Phase 3: Implementing the System
In relation to previous stages, it is crucial for financial institutions to ensure quality training of staff members who will deal with transaction screening and generated alerts. Financial firms must pay closer attention to guidance of personnel and reduce errors as much as possible. This innovative approach streamlines the implementation of KYT procedures. Staff members must conduct pre-transaction checks and manage alerts & relevant documentation properly.
Phase 4: Resolving Issues & Enhancing the System
When Financial Institutions (FI) identify suspicious monetary transactions, firms must notify the STR officer by filing Suspicious Transaction Reports (STRs). If FI wants to maintain relationships with clients, there must be proper protocols in place for effective risk mitigation. This is also known as post-STR practices, which are about putting suspicious accounts through scrutiny and obtaining approval from higher authorities. FIs must encourage quality assurance checks by examining the quality of notification management and KYT know your transaction process.
The Bottom Line
Too much dependence on KYC systems for risk mitigation can generate false positives where a client gets highlighted incorrectly for financial risks. Critical analysis of monetary exchanges can offer valuable data to identify illicit exchanges timely. A robust KYT know your transaction process is compulsory for FIs to discourage money laundering and terrorism financing cases.
KYT know your transaction procedure is a GDPR & PCI DSS-compliant solution that ensures unbeatable data security. This way, corporations can secure a competitive advantage and boost yearly sales. The AI-driven system also attracts genuine customers worldwide to ensure global coverage and multi-lingual support.