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Best Types of Transaction Monitoring and Compliance Testing for Banks

In: Business

Banks must adhere to various compliance regulations to protect their customers and prevent financial crimes. One of the most critical aspects of compliance is transaction monitoring and testing.

This blog will discuss the different types of transaction monitoring and compliance testing that banks should regularly do.

1) Transaction Monitoring Software

Transaction monitoring software is a type of compliance testing that banks use to track and monitor customer transactions. This type of software can help identify suspicious activity, such as money laundering or fraud.

Transaction monitoring software can monitor all transactions, including wire transfers, credit card transactions, and ACH transactions. Banks typically use this type of software to comply with the Bank Secrecy Act and the USA Patriot Act.

Some common types of Transaction monitoring software are:

a) Trade Surveillance

The best feature of a sound surveillance system is tracking both legitimate and illegitimate trades. By constantly monitoring all transactions, banks can quickly identify any that fall outside the usual parameters.

For example, if a customer is usually active during the daytime but suddenly starts making trades at night, that could cause concern.

b) Sanctions Screening

Most banks are subject to sanctions from one or more governments. They must screen all transactions to ensure that none of their customers are trying to send money to a sanctioned country.

Some benefits of sanctions screening software are:

-The ability to quickly update the list of sanctioned countries and entities.

-Automated screening of all transactions against the sanctions list.

-The ability to flag transactions that may require further investigation.

c) Anti-Money Laundering (AML)

Banks are required by law to report any suspicious activity to the relevant authorities. To do this, they must have systems in place to detect potentially illegal transactions. It includes things like large cash deposits or transfers to known tax havens.

Some unique features of an AML solution are:

-The ability to track “red flags” that may indicate money laundering.

-The ability to monitor customer activity for patterns that could be associated with illegal activity.

-The ability to create reports of suspicious activity for submission to the authorities.

2) Compliance Testing

It assesses whether a company is adhering to internal policies and external regulations. It can detect and prevent financial crimes, such as money laundering and terrorist financing.

There are several compliance tests that banks can perform, including:

– KYC (Know Your Customer) checks

– AML (Anti-Money Laundering) checks

– Sanctions Screening

– PEP (Politically Exposed Person) checks

a) Instant Online AML Software

AML refers to anti-money laundering. There are many software platforms that banks can use to perform AML compliance testing. These software platforms can be used for various purposes, including transaction monitoring, customer risk assessment, and other compliance-related tasks.

Here are some ways to use the best instant online AML software:

-It helps to know your customers better: The software can help banks obtain information about their customers’ identity, financial history, and other background details. This information can be used to assess customer risk and perform due diligence.

-It helps to detect suspicious activity: The software can monitor customer transactions and activities for signs of money laundering or other illegal activity. It can also help banks to identify and investigate potential cases of fraud.

-It helps to comply with regulations: It can help banks meet their compliance obligations under AML laws and regulations. It can also help banks to avoid penalties for non-compliance.

b) PEP Monitoring Software

A few different software programs on the market can help with PEP monitoring. Banks should look for a customizable program that can be tailored to fit their specific needs. Some of the features to look for in the best PEP monitoring software include:

-The ability to track multiple transactions across multiple channels

-Real-time alerts

-A rules engine that can be customized

-Detailed reporting

-Integration with other compliance systems

c) Employee Onboarding & Training

To ensure that your bank complies with the relevant regulations, it is essential to have a robust employee onboarding and training program. It should include both classroom-based instruction and on-the-job training.

Additionally, all employees should receive ongoing education and training and regular refresher courses.

This solution will offer benefits like:

– reducing the likelihood of errors and omissions

– increasing employee productivity

– promoting a culture of compliance.

d) Compliance Policies & Procedures

Your bank should have well-documented policies and procedures that govern all compliance aspects. These should be reviewed and updated regularly.


Banks and other financial institutions must take transaction monitoring and compliance testing seriously to avoid being fined or shut down by regulators. By understanding the different types of tests available, banks can choose the right mix of tests to ensure that their transactions are compliant with regulations.

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