On the 11th April 2023, the Financial Intelligence Analysis Unit published a detailed guidance note entitled: A Look Through the Obligation of Transaction Monitoring

While all subject persons have a critical role to play in the fight against financial crime, this guidance note focuses on the transaction monitoring requirements pertaining to institutions which process payments and similar transactions for and behalf of customers, including but not limited to, banks and other depository institutions, electronic money (e-money) institutions, payment service providers (PSPs) and merchant acquiring companies.

The purpose of this guidance note is to provide more insight into the FIAU’s expectations vis-à-vis transaction monitoring. The guidance note also highlights common transaction monitoring related findings and observations noted during the enforcement and follow-up processes, as well as any key takeaways that emerged therefrom.

Characteristics of an Effective Transaction Monitoring Programme

The guidance note lists seven non-exhaustive take-aways relating to an effective transaction monitoring programme. These key takeaways are:

  • Knowing and understanding your customers – establishing the customers’ business and risk profiles, as well as updating such profiles on a risk sensitive basis.
  • Adequately monitoring and scrutinising all transactions that appear to be unusual, suspicious or diverge from the customers’ business and risk profiles, which includes requesting further supporting information and/or documentation to justify the rationale behind certain transactions.
  • Implementing appropriate and tailored transaction monitoring systems which take into consideration the products/services offered, transactions executed on a daily basis and the customer base.
  • Establishing a set of properly defined detection rules (risk scenarios, thresholds and parameters) which are tested and fine-tuned on a regular basis.
  • Having in place a robust process for the notification and handling of alerts that minimises the likelihood of false positives being generated.
  • Ensuring that if there are reasonable grounds to suspect ML/FT, the transaction/activity is reported to the FIAU without undue delay.
  • Ascertaining that the transaction monitoring programme has sufficient resources, which includes personnel, technology and infrastructure, to support effective transaction monitoring.

The guidance note also provides guidance on the type of transaction monitoring systems which subject persons are expected to deploy in the undertaking of their obligations, best practice on the implementation of detection rules, testing of such detection rules, alerts management systems. The concepts of pre and post transaction monitoring are also delved into with the FIAU providing examples on when and how such type of monitoring is to be undertaken.

Should you have any questions regarding the contents of this article and/or have any queries on the implementation of a robust transaction monitoring programme, please do not hesitate to contact Mario Zerafa.