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Ongoing Monitoring

16 October, 2023

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A crucial part of mitigating the risk of fraud and developing strong business relationships is to Know Your Customers (KYC), suppliers, and third parties. Gathering data about them is not only essential for Customer Due Diligence (CDD) and risk assessment but to implementing effective measures to adhere to regulations. Collecting information about clients, vendors, and third parties at the time of onboarding is not enough. This is because clients’ finances, locations, and relationships change over time, making them low or high-risk entities to work with. This is where ongoing monitoring came as a hope, keeping an eye on customers involved to check the risk level they may pose at any time during their relationship.

What is Ongoing Monitoring?

An ongoing monitoring process means continuously tracking the situations of your clients, suppliers, and third parties for any changes. Conducting ongoing monitoring using a private and public database helps in monitoring the profiles of customers interacting with your business and automates alerts for when any changes are detected. For instance, if you are working in a financial services firm and anyone files for bankruptcy or another shift in their financial situation, ongoing monitoring notifies you of the change. Ongoing monitoring involves accessing detailed and up-to-date information about the individuals interacting with your organization to help you update profiles and customize services accordingly.

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What is Ongoing Monitoring in AML?

Ongoing monitoring in AML involves checking the following:

  • Ultimate Beneficial Ownership (UBO): Firms need to check changes in the UBO structures to detect those entities posing a greater risk to them so that they can take necessary action. 
  • Sanctions: Such lists are changing continuously, with individuals and organizations being removed or added. Thus, checking the customers and entities against sanctions lists regularly is crucial to mitigate the risk of financial fraud. 
  • Politically Exposed Person (PEP): A customer with whom you are conducting business regularly could become a PEP anytime after winning an election or getting a new appointment in a global firm. Thus, a PEP needs to be identified and flagged and should be subject to Enhanced Due Diligence (EDD).
  • Adverse Media: A customer or entity must be checked for any adverse media coverage in an ongoing manner. Checking the clients’ public profile is critical to detect changes in the level of risk they may pose to protect the firm from reputational damages.

Why Do Businesses Perform Ongoing Monitoring?

Ongoing monitoring is crucial to know your customer process, a key component of Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) regulations. It helps organizations detect and authenticate their clients and monitor their activities continuously.

Conducting ongoing monitoring is crucial for firms to ensure AML and CFT compliance. One of the main reasons businesses perform ongoing compliance monitoring is to protect themselves from heavy non-compliance fines. Ongoing monitoring does not only help to abide by AML/CFT regulations but also mitigates the risk of money laundering and other financial crimes.

How to Ensure an Effective Ongoing Monitoring?

Ensuring the effectiveness of the ongoing monitoring process is essential for companies to identify and prevent financial fraud and to better adhere to AML and CTF regulations. Here is how an organization can ensure an efficient ongoing risk-monitoring process:

  • Use Robust Monitoring Solutions: One of the best ways to ensure the effectiveness of the ongoing monitoring KYC is using robust screening tools that automate and streamline the process. Efficient monitoring solutions help businesses detect and evaluate risks, track any unusual activity, and create reports for regulatory and compliance reasons. 
  • Review and Update Policies & Procedures Regularly: Businesses are required to evaluate and update their policies & procedures continuously to ensure that they are meeting the evolving AML and CFT regulations and latest trends. This includes analyzing and updating CDD procedures, transaction monitoring standards, and suspicious activity reporting processes on an ongoing basis 
  • Provide Training to the Employees: Employee training is crucial to ensure an efficient ongoing monitoring process. Organizations must provide regular training to their staff to ensure they are well aware of their roles and responsibilities. Not only this, but the employees must understand the evolving AML/CFT regulations so that they can better detect financial fraud and maintain smooth regulatory compliance. 
  • Conduct Internal and External Audits: Conducting internal and external audits regularly plays a crucial role in ensuring the best quality of the ongoing monitoring process. Such audits facilitate organizations in detecting and addressing loopholes in their compliance programs to better fulfill regulatory requirements.

Use Advanced Technology: Businesses must consider using sophisticated technology to ensure the best quality for ongoing monitoring. This includes leveraging Artificial Intelligence (AI), Machine Learning (ML), and other technologies that can help firms identify any unusual activity more accurately and quickly.

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