Companies in the fintech field usually deal with critical parties who may be at risk of being involved in financial crimes, including money laundering, terrorist financing, bribery, etc. One of the most essential parts of these organizations is the economic security of the firm and avoiding the risk of being the victim of any illicit activity.
The need for transaction monitoring in Fintech serves as a critical tool to detect suspicious activity and analyze consumers’ previous and updated data. Despite the complicated process, integrating AI and ML algorithms has made it easy to incorporate into the existing systems. Keep reading the blog to understand transaction monitoring and related use cases.
What is Transaction Monitoring and KYT Screening – Explained
Transaction screening or analyzing payment methods is essential to Anti-money laundering (AML) compliance. It involves a thorough inspection of consumer payment patterns and helps businesses improve their security systems within the ecosystem. All the money conversions, withdrawals, deposits, or other retail transactions can be employed to launder black market income.
However, the worst part is that black money can be used almost anywhere, from gaming platforms to loan payments. Know Your Transactions plays a vital role in such cases and works by streamlining the strategic approach to detecting illegal activities. It collects and inspects consumers’ information while implementing the strategy of constant monitoring to deal with criminal activities.
Transaction Screening in the Fintech Industry
Transaction screening in the Fintech sector is a practice designed to monitor and inspect customer transactions, such as deposits, withdrawals, or transfers, for fintech organizations to detect potential criminal activities, such as money laundering and terrorist funding.
Moreover, the automated transaction screening establishes the consumer’s profile, executes constant monitoring, and inspects the anomalies while reporting unusual patterns or behaviors to the concerned authorities. The streamlined strategies enable the companies to flag suspicious transactions and help them achieve greater efficiencies and regulatory compliance.
Why is Transaction Processing Screening Required in Fintech?
Payment screening involves KYC transactions, and business settlements need critical analysis of financial activities. The primary objective of the implementation is to generate high alerts on suspicious transactions that allow organizations to seize instant actions and mitigate potential risk factors. Moreover, the following are some of the reasons the Fintech industry should incorporate transaction monitoring:
Frequent Transaction
The frequent transfers and irregularities in the deposits and withdrawals lead to unusual activity by the account owner. However, if the consumer’s transaction operation instantaneously exceeds their historical proceedings, it may raise a red flag.
Cryptocurrency Transactions
Using virtual currency and assets to execute transactions also refers to high-risk funds transfers. Criminals involved in illegal activities usually prefer cryptocurrencies for their illicit funding. Therefore, the need for KYT in the crypto industry is not a choice but a need to get hold of these crimes.
Unreasonable Refunding’s
Instant refunding is also referred to as an unusual payment behavior. It is also generated as a sign of fraudulent action that may indicate the exploitation of vulnerabilities in the withdrawal procedures. It also involves presenting false claims or transaction manipulation for personal gains.
Use Cases of Business Transaction Monitoring
AML Screening
The dynamic AML screening implements the transaction monitoring approach to detect and eradicate the risk of financial fraud. It handles cases in real time using automated AML checks.
User Onboarding
One primary use of transaction screening is to quickly onboard users while boosting business conversion rates. It combats impersonation attacks and identity theft. The automated system works efficiently while improving consumer satisfaction.
Fraud Detection
Transaction monitoring in Fintech prevents real-time crimes, including money laundering, identity theft, bribery, and tax evasion. The robust solutions verify the consumer’s identity to assist the high-risk profiles with 3D liveness detection and anti-spoofing checks. It proactively validates the documents and information the user provides while inspecting the digital forgery.
Business Verification
It works with the KYB process to ensure security and seamless onboarding. Real-time authentication performs ultimate fraud coverage and fully automates the screening of payments and transactions executed in banks, legal sectors, insurance companies, etc.
KYC Screening
The digital methodology of KYC verification also involves a transaction monitoring process to authenticate the deposits, withdrawals, and unusual funds transfers. It offers enhanced security and consumer acceptance policies.
Final Statement
Transaction monitoring in Fintech is implemented to fight the never-ending battle of financial security. Businesses in this field have encountered numerous challenges while protecting themselves against financial fraud. However, technological advances have facilitated companies with robust security approaches, including KYT Know Your Transaction methods, and encountering criminals while reducing the risk of data privacy or any illegal money proceedings. However, investing in crucial methodologies and protecting the financial structure from unauthorized access is essential.
