In Australia, businesses subject to Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws must implement an effective, risk-based transaction monitoring program. This program is crucial in identifying suspicious activity, mitigating potential risks, and maintaining compliance with the regulatory requirements set out by AUSTRAC (Australian Transaction Reports and Analysis Centre).
Why Transaction Monitoring is Essential?
A well-structured transaction monitoring program enables your business to:
- Identify, mitigate, and manage Money Laundering and Terrorism Financing (ML/TF) risks.
- Meet Ongoing Customer Due Diligence (OCDD) and Enhanced Customer Due Diligence (ECDD) obligations.
- Report Suspicious Matter Reports (SMRs) to AUSTRAC in a timely and compliant manner.
Building a Risk-Based Transaction Monitoring Program
Reporting entities must document how they monitor customer transactions in their AML program. The transaction monitoring controls must be based on your risk assessment. The transaction monitoring systms can be manual or automated considering the:
- Business size and complexity
- Customer base and geographic locations
- Services and products offered
Components of an Effective Transaction Monitoring System
Your transaction monitoring program should:
– Clearly outline how suspicious customer transactions are identified.
– Specify and document the systems and procedures that mitigate ML/TF risks.
– Collect all relevant customer and transaction data to monitor for suspicious activity.
– Set up systems to trigger alerts based on:
- Large, frequent, or unusual transactions that may indicate suspicious behavior.
- Transactions that are sent or received from high-risk countries or regions.
- Structuring transactions to avoid reporting obligations.
- Payments involving sanctioned individuals or organisations.
- Activities inconsistent with a customer’s risk profile.
- Increased monitoring of customers previously involved in suspicious activities.
– Establish procedures to review, investigate, and escalate alerts.
– Ensure that all processes are well-documented to maintain consistency and compliance.
– Apply transaction monitoring across all areas of the business, ensuring that all branches or venues are covered.
– Document processes in detail.
– Document and audit any automated transaction monitoring processes.
Effective Governance and Oversight
AUSTRAC expects that a transaction monitoring program has robust governance, oversight, and processes that are effective, sustainable and repeatable. To maintain the integrity and effectiveness of the program, independent reviews should be conducted regularly to assess its ongoing relevance. The reviews must ensure that the transaction monitoring processes are used appropriately and continue to reflect current risks.
Integration of Information to Understand the Customer’s Profile
To effectively manage ML/TF risks, your business must use all available information sources and processes to monitor the services provided to customers. These include customer identification procedures, transaction monitoring, Enhanced Customer Due Diligence (ECDD), and reporting, all of which contribute to a holistic understanding of the customer’s risk profile.
Rather than operating independently, these processes must work together to ensure a unified view of the customer. Alerts triggered by transaction monitoring should be reviewed in the context of the customer’s history, including law enforcement data, to ensure informed decision-making.
Your business must have systems in place to quickly and easily combine relevant information across different teams to provide a comprehensive assessment of the customer’s ML/TF risk profile. This ensures that your risk management processes are thorough, efficient, and proactive.
Ongoing Review and Assurance of the Program
Your transaction monitoring program must be continuously reviewed to ensure that it applies to all designated services at all times. This involves:
- Ensuring no disruptions occur in downstream AML/CTF processes when changes are made to systems.
- Making sure system changes that could impact compliance are approved by senior management.
- Maintaining assurance processes that fully document and map AML/CTF systems.
Periodic reviews should confirm that the program operates as intended, uses complete data, and adapts to new ML/TF methodologies. In cases where issues arise, businesses must ensure quick resolution to avoid compliance failures, as such failures could have significant implications for other AML/CTF obligations.
Continuous Improvement of Transaction Monitoring
Regular updates and refinements are essential to stay ahead of evolving ML/TF risks. Automated transaction monitoring systems should integrate emerging typologies and crime methods to ensure that they remain effective. Furthermore, any identified system issues must be promptly addressed, including retrospective coverage for past transactions affected by the breakdown.
0 Comments