Why Ongoing Monitoring is Key to Money Laundering Risk Mitigation

The process of Ongoing Monitoring entails supervision of business relationships that are established with customers. The supervision of business relationships includes keeping a close eye on customer activities and monitoring transactions executed throughout the life cycle of the business relationship to ensure that these are consistent with the customer profile created by the regulated entity using the Know Your Customer (KYC) exercise of the Customer Due Diligence (CDD) process. The factors given below showcase why ongoing monitoring is essential for money laundering risk mitigation.

1. Managing ML/TF Risks

Ongoing Monitoring helps identify, at the earliest, the potential ML/TF risks associated with customers as any deviation or variation in customer profile, customer behaviour, or transaction pattern is captured during the ongoing monitoring process, enabling the business to manage ML/TF risks by deploying necessary ML/TF risk mitigation measures effectively.

2. Reputation Management

Having a grasp over identifying suspicious transactions and activities helps businesses to evade potential reputational loss that comes along due to association with individuals and entities engaged in ML/TF.

3. Maintaining Transparency

Ongoing monitoring helps maintain transparency in business dealings as it helps with timely identification and disclosure of changes or fluctuations in customer profiles, necessitating seeking the latest information from customers. This gives no room for kickbacks or corruption by employees of the organisation to facilitate criminals in misusing an organisation to further their illicit motives and promotes two-way transparency that includes business and customers equally.

4. Early Detection of Suspicious Activities

The best part about ongoing monitoring software or tools is that it immediately notifies or generates an alert upon observing any inconsistencies in customer behaviour or transactions. This helps businesses detect potentially suspicious activities indicating ML/TF early.

5. Compliance with Regulatory Requirements

Conducting ongoing monitoring assists businesses in fulfilling mandatory regulatory requirements of the supervision of business relationships with customers, which forms part of the Customer Due Diligence (CDD) process contained in the AML regulations of the UAE.

6. Adaptation to Evolving Threats

An ongoing monitoring practice or tool, over a period of time, helps businesses to develop an understanding of evolving ML/TF typologies and helps adapt to evolving ML/TF threats due to continuous observation of behaviour and transaction trends of customers.

7. Timely Reporting

Conducting ongoing monitoring assists businesses in fulfilling regulatory reporting requirements such as timely filing of Suspicious Activity/Transaction Report (SAR/STR) to the UAE Financial Intelligence Unit (FIU) through the goAML portal, thus reducing incidences of fines and penalties.

8. Strategic Decision-Making

By having in place an ongoing monitoring mechanism, businesses can make strategic decisions as to client onboarding and client offboarding, along with setting measures for seeking additional information to satisfy queries raised due to findings observed during the ongoing monitoring process, such as those requiring Enhanced Due Diligence measures (EDD) by seeking Sources of Funds (SoF) and Sources of Wealth (SoW).