Delivering an automated transaction monitoring solution for a European bank

European bank

Delivering a tailored in-house Automated Transaction Monitoring platform in less than a year

Our client, a large European bank, had been ordered by the national regulator to address its Transaction Monitoring (TM) governance and framework, after several of the bank’s subsidiaries were found to have inadequate TM controls. The subsidiaries offered mainly mortgage and asset finance products, which were seen by the bank as low risk with respect to terrorist financing and money laundering. For this reason, the bank was monitoring only a handful of transactions from a daily total of thousands, and some subsidiaries were monitoring none at all. The regulator judged that the bank wasn’t complying with AML regulations, and set a tight deadline of a year to put more rigorous TM controls in place. BeyondFS had previously worked with the bank on other regulatory projects, and due to our experience in this field we were asked to deliver the TM programme.

Industry Segment
AML

Function
Transaction monitoring

CORe CAPABILITIES
Risk assessment

Key outcomes delivered

A bespoke in-house Transaction Monitoring platform was delivered from scratch in 11 months

100% of transactions totalling thousands per day, are now being monitored across a number of product groups and business units

The tight mandatory delivery deadline imposed by the regulator was met successfully

Results

Months

11

The Transaction Monitoring (TM) platform was delivered in 11 months.

Percentage

100

Percentage of transactions, amounting to several thousand per day, are now being monitored.

Scope of implementation

4

European countries, and multiple business units, benefited from the successful implementation of the TM platform

Challenge

Tight deadlines for more rigorous TM controls.

The European bank was ordered to assess its Transaction Monitoring processes due to inadequate controls in subsidiaries - facing a tight one-year deadline.

Approach

Building an automated platform in-house from the ground up

To get underway, BeyondFS carried out a comprehensive risk assessment, especially around AML, for the product groups offered by the bank’s subsidiaries. We analysed the bank’s customer base and their product profiles, identifying missing controls to mitigate risks such as third-party loan repayments. This allowed us to create a library of AML risk typologies tailored to the products, customer segments and use cases found in the bank. Following the risk assessment, we considered our options.

With thousands of transactions going through each day, it was essential to find a practical solution that minimised additional resource needed, but would be robust enough to satisfy the regulator. An automated solution was the obvious choice, but we knew from experience that customising an external vendor solution would take 2-3 years considering the vendor selection process, due diligence, integration with existing platforms, training, implementation and rollout.

Furthermore, the standard monitoring scenarios used by vendor solutions could not easily be mapped to the specific risk typologies encountered within the bank.

The solution we landed on, which may seem counterinitiative, was that the only way to deliver an automated platform in the required timeframe would be to build it in-house from the ground up. So that is what we did.

We established which data we had in place already, what needed to be sourced from elsewhere, and where we were going to get it. Then we built an SQL based TM platform which automated controls for the required AML risk typologies. For example, alerts would flag certain early redemptions for investigation, or instances where someone in one country applied for loan, but repayments came from a different country.

We refined our beta model by running scenarios and reviewing the outputs. Only a small subset needed investigating manually, and we refined our rulesets still further by identifying the main causes of false positives.

Outcome

Successful TM platform launch in 11 months

We successfully delivered a robust TM platform across multiple business units in four European countries, within the regulatory deadline. In 11 months, from a standing start, we moved from a situation where previously the bank’s subsidiaries had carried out zero monitoring, or monitoring small samples manually, to one where an automated platform was monitoring all transactions, totalling several thousand per day. Building an in-house TM system in this timeframe would not normally be achievable in a large bank.

A successful outcome was possible only because of the specialist expertise and experience of the BeyondFS team, and our deep understanding of our client’s business, their data requirements, and the TM landscape.