🔍 Part -10, Top AML & KYC Interview Questions and Answers🔍

1. What is transaction monitoring in AML?

Answer: Transaction monitoring in AML involves systematically reviewing financial transactions to detect suspicious activities that may indicate money laundering or other illicit activities. It uses various tools and algorithms to analyze transaction patterns.

2. Why is transaction monitoring important in AML?

Answer: It is crucial for detecting and preventing money laundering and terrorist financing activities. Effective transaction monitoring helps institutions comply with regulatory requirements and protect their reputation.

3. What types of transactions are monitored?

Answer: Financial institutions monitor various transactions, including cash deposits, wire transfers, international transactions, and large or unusual withdrawals that deviate from typical customer behaviour.

4. What are common red flags in transaction monitoring?

Answer: Red flags include large cash deposits, rapid movement of funds between accounts, transactions inconsistent with a customer's known profile, and transactions involving high-risk countries.

5. How does automated transaction monitoring work?

Answer: Automated systems use predefined rules and machine learning algorithms to analyze transaction data in real time. They flag suspicious transactions for further investigation by compliance teams.

6. What role does customer due diligence (CDD) play in transaction monitoring?

Answer: CDD involves collecting and verifying customer information to understand their risk profile. This information is essential for effective transaction monitoring, as it helps identify suspicious activities based on the customer's normal behaviour.

7. How often should transaction monitoring systems be reviewed or updated?

Answer: Transaction monitoring systems should be reviewed regularly, ideally at least annually, to ensure they effectively detect emerging threats and adapt to changes in regulatory requirements and market conditions.

8. What are the consequences of ineffective transaction monitoring?

Answer: Consequences can include regulatory fines, legal penalties, reputational damage, and increased scrutiny from regulators. It can also fail to prevent money laundering and other financial crimes.

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By Anand Rajpurohit