In the fight against financial crime, it’s easy to conflate transaction screening with transaction monitoring—but each serves a distinct purpose. Failure to distinguish between them not only leaves compliance gaps but may expose institutions to stealthy risks. Here’s how these two critical functions fit together and why doing both right is essential for a resilient AML strategy.
Screening: The First Line of Defense
Screening operates at the entry point—it’s about ensuring that individuals and entities being onboarded aren’t already flagged in sanctions lists, politically exposed persons (PEPs) databases, or adverse media channels. Think of it as a pre-emptive checkpoint: if a new client matches a watchlist entry, the relationship must be flagged, slowed down, or paused for further investigation. Without effective screening, institutions risk onboarded clients already implicated in financial wrongdoing.
Monitoring: The Long-Term Sentinel
Monitoring picks up where screening ends. It’s about continuously supervising account behavior and detecting anomalies over time—be it unusual transaction patterns, rapid movement of funds, or sudden structural changes in financial flows. Monitoring tools need to be adaptive and intelligent, catching emerging red flags that evolve post-onboarding.
For example, a client might clear screening checks but later engage in structuring or layering money transactions—classic laundering steps. Without robust monitoring, this suspicious behavior can easily slip under the radar.
Why Both Are Non-Negotiable—and Different
It’s important to recognize that screening and monitoring are not interchangeable:
- Screening ensures no high-risk entity slips in during onboarding.
- Monitoring ensures suspicious behavior doesn’t escape notice once the relationship is live.
When integrated effectively, they form a layered defense against both known and developing risks. Screening keeps the gates secure, while monitoring patrols the perimeter.
Elevating Your Compliance Game
To stay ahead:
- Implement real-time, watchlist-based screening every time a new account is opened or a significant change is made.
- Deploy continuous monitoring tools that flag out-of-the-ordinary patterns based on behavior, geolocation, or transaction velocity.
- Ensure screening and monitoring systems are finely tuned and interoperable, so alerts are contextual and investigators aren’t overwhelmed.
- Regularly review alert performance to reduce false positives and keep your compliance team agile.
