Dealing with Suspicious Transactions

Blog Post and Advisor Templates (1)

Blog Post and Advisor Templates (1)

Suspicious transactions have historically threatened the safety of banks, specifically, and financial services companies in general.

But that trend has accelerated over the past few decades, as digital payments have risen in prominence and as opportunistic fraudsters figure out new ways to con businesses out of their hard-earned cash.

Case in point.

According to the US Treasury’s Financial Crimes Enforcement Network, with data culled from the International Consortium of Investigative Journalists, Uncle Sam has tracked “trillions of dollars” in suspicious financial transactions from 1999 to 2017.

According to Hugh Cadden, a Senior Consultant at OnPoint Analytics, Inc., and a financial markets compliance expert, "The leaked Sars data in the ICIJ report underscores the magnitude of the AML burden on financial institutions. It's huge. And while most institutions are successfully using RegTech solutions for Sars reporting, recent AML-related enforcement actions and record fines demonstrate they are not using smart solutions to analyze and manage the data. Reporting is easy! It's the analysis, or more specifically the failure, that results in the regulatory and reputational risks. Financial institutions need to use smart AI solutions to connect the suspicious activity dots."

In its report, the ICIJ details the total suspicious transactions for the top 10 bank-reported SARs in the FinCen tracking period between 1999 and 2017 – as follows:

Following the Money

That’s where RegTech can help.

According to the ICIJ report, banks and credit unions – online and off – have significantly limited abilities to track suspicious payments. In fact, they were only able to track a “miniscule” amount of SARs alerts, with even lower successful outcomes in rooting out financial fraud. With results like that, criminals will only grow more emboldened in pushing through financial payment firewalls to their advantage.

RegTech tools can thwart those efforts, and it all begins with a robust focus on getting, reviewing and disseminating data that can make key distinctions on suspicious payments.

This from a recent report on financial fraud from Accenture: 

Data analytics – the lifeblood of regulations. To meet regulators’ prospects, banks essentially store, access and process data on a measure never previously predicted. Data sets must be deep, accurate, and their contents should be able to be cross-examined, viewed and operated with much more flexibility than earlier, with different potentials and for different purposes. 

RegTech provides not just solutions to report or monitor for banks to remain compliant but also provides solutions constructed around the data. 

On the one hand, advanced technologies make a significant positive impact on alternative data sources, enabling better decision-making and rigorous research and processing of unstructured data for intelligent management. On the other hand, advanced technologies are interactive, adaptive, collaborative and intelligent, and thereby reducing the complexity, accelerating time to analysis and adding value to company financial data tracking efforts.

Getting Off the “Suspicious Payments” List

As the old business saying goes, preventing risks is preferable to dealing with risks after it’s too late.

Since, banks and financial institutions get and track thousands of financial fraud alerts and suspicious notification alerts on a daily basis, the trick for financial institutions is to figure out which suspicious payments need immediate follow-up, as they represent the biggest risk to banks and financial services companies.

With RegTech tools like anti-money laundering (AML) protection via “smart” applications, anti-transaction fraud detection software that operate on a single-risk platform, and communication tracking via machine learning and behavioral data software, financial institutions can leverage RegTech to minimize money lost due to suspicious payments that prove to be suspicious for a good reason.

In the process, banks and other industry firms that handle a substantial amount of financial transactions (digitally and otherwise) and keep their names off those ubiquitous lists of financial services companies that lose large sums of money due to suspicious payment activity.

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