Why Post-Monitoring Matters for AML & Fraud

In the fast-paced world of fintech and neobank innovation, staying ahead of the competition often requires balancing risk management with customer experience. One key area where this balance is critical is in the realm of anti-money laundering (AML) compliance and fraud protection. Failing to adequately identify and mitigate these risks can result in significant financial losses, regulatory penalties, and reputational damage.

One essential tool for achieving effective AML compliance and fraud protection is post-monitoring. By implementing comprehensive post-monitoring, fintechs and neobanks can gain valuable insights into their customers' behavior and identify potential risks.

In this article, we will explore the importance of post-monitoring for fintechs and neobanks, including its best practices. Whether you are just getting started with AML compliance and fraud protection, or are looking to enhance your existing practices, this guide will provide valuable insights and guidance for achieving your post-monitoring goals.

What is post-monitoring?

Post-monitoring is a type of transaction monitoring that involves analyzing historical transaction data to identify patterns and anomalies that may indicate illicit activity. Unlike real-time transaction monitoring, which focuses on stopping suspicious transactions as they occur, post-monitoring is retrospective in nature and is typically conducted on a regular basis (e.g. daily, weekly, monthly) to identify potential risks that may have been missed by real-time monitoring.

Post-monitoring involves analyzing transaction data across multiple dimensions, including transaction amount, frequency, location, and counterparty. By doing so, it is possible to identify suspicious transaction patterns that may indicate money laundering, fraud, or other illicit activities.

In addition to identifying potential risks, post-monitoring can also be used to improve overall risk management practices. By analyzing historical transaction data, fintechs and neobanks can gain valuable insights into customer behavior, identify areas where risk management practices may be improved, and optimize their risk management strategies accordingly.

Best practices for effective post-monitoring

To achieve the greatest benefits from post-monitoring, fintechs and neobanks should follow a number of best practices. Some of the most important include:

1. Establish clear risk management policies: Before conducting post-monitoring, fintechs and neobanks should establish clear risk management policies that outline their approach to AML compliance and fraud protection. These policies should be regularly reviewed and updated to ensure that they reflect the latest industry standards and regulatory requirements.
   
   
2. Data collection: The next step in post-monitoring is to collect data on transactions and customers. This data may come from a variety of sources, including internal transaction records, customer information, and external databases such as sanctions lists and watchlists
   
   
3. Conduct regular risk assessments: As part of post-monitoring, fintechs and neobanks should conduct regular risk assessments to identify potential risks and evaluate the effectiveness of their risk management practices. These assessments should be conducted on an ongoing basis to ensure that risks are identified and addressed in a timely manner.
   
   
4. Transaction monitoring: After the risk assessment has been completed, transactions can be monitored in real-time to identify potential indicators of AML or fraud activity. This may involve setting up rules and alerts based on specific transaction criteria, such as unusual transaction amounts, high-risk customer behavior, or transactions involving high-risk countries or industries.
   
   
5. Investigation and reporting: When potential AML or fraud activity is identified through transaction monitoring, the incident must be investigated further to determine whether it is a false positive or a genuine risk. If the activity is found to be suspicious, it must be reported to the relevant authorities in accordance with AML regulations.
   
   
6. Train employees on AML compliance and fraud protection: Effective post-monitoring requires a team effort, so it is important to ensure that all employees are trained on AML compliance and fraud protection best practices. This may include regular training sessions, workshops, and other forms of education to ensure that everyone in the organization is on the same page.
   
   
7. Partner with a trusted compliance provider: Finally, fintechs and neobanks should consider partnering with a trusted compliance provider like Flagright to ensure that they have access to the expertise and resources they need to achieve effective AML compliance and fraud protection. A trusted provider can offer guidance, support, and specialized services to help fintechs and neobanks navigate the complex landscape of AML compliance and fraud protection.

By following these best practices, fintechs and neobanks can achieve the greatest benefits from post-monitoring and minimize the risk of financial losses, regulatory penalties, and reputational damage.

It is useful to note that human expertise is also critical to ensuring that transactions are properly assessed and investigated. This may include AML compliance officers, fraud analysts, and other skilled professionals with expertise in financial crime detection and prevention.

What makes post-monitoring important?

Post-monitoring is an essential tool for AML compliance and fraud protection in the fintech and neobank industry. There are several reasons why it is so important:

1. Identifying long-term trends: By analyzing transaction data over a period of time, post-monitoring can help identify long-term trends and patterns that may indicate potential AML or fraud risks. This is particularly important for detecting sophisticated financial crimes that may occur over a longer period of time, such as money laundering schemes.
   
   
2. Meeting regulatory requirements: Many regulatory bodies require financial institutions to perform post-monitoring as part of their AML compliance program. Failure to comply with these requirements can result in significant fines and penalties.
   
   
3. Supporting investigations: Post-monitoring can provide valuable insights into historical transactions that may be useful in investigations of potential financial crimes. This can help law enforcement agencies and regulatory bodies build stronger cases and increase the likelihood of successful prosecution.

In summary, post-monitoring is a critical tool for AML compliance and fraud protection in the fintech and neobank industry. By analyzing transaction data over a longer period of time, businesses can identify potential risks and patterns that may not be immediately apparent through real-time monitoring, meet regulatory requirements, reduce false positives, and support investigations of financial crimes.

Conclusion

As the fintech and neobank industry continues to grow, so do the risks associated with financial crime. AML compliance and fraud protection are essential for companies operating in this space, and post-monitoring is a critical tool in achieving these objectives.

To achieve comprehensive AML compliance and fraud protection, companies should consider implementing a combination of real-time and post-monitoring. This approach can help identify immediate threats and long-term risks, providing a more comprehensive view of transaction data and reducing the likelihood of financial crime.

If you're interested in learning more about how post-monitoring can help your fintech or neobank achieve comprehensive AML compliance and fraud protection, contact us here to schedule a free demo.