On 11 April 2023, the Financial Intelligence Analysis Unit (the “FIAU”) published a comprehensive guidance note on the transaction monitoring obligations of subject persons, specifically aimed at institutions that process payments and similar transactions on behalf of customers, including banks, electronic money (e-money) institutions, payment service providers (PSPs), and merchant acquiring companies.
The guidance note provides subject persons with an understanding of the FIAU’s expectations with respect to transaction monitoring, addresses certain misconceptions and highlights common transaction monitoring findings identified throughout enforcement and follow-up processes.
The guidance note outlines, inter alia, several non-exhaustive key components of an effective transaction monitoring program, including:
- Knowing and understanding your customers – establishing the customers’ business and risk profiles, understanding the purpose and intended nature of the business relationship whilst updating such profiles on a risk-sensitive basis;
- Adequately monitoring and scrutinising all transactions that appear to be large, unusual, suspicious, disproportionate or diverge from the customers’ business and risk profiles, which includes requesting, on a risk-sensitive basis, 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 size and complexity products/services offered, transactions executed daily, the risk appetite and the customer base of the subject persons;
- Establishing a set of properly documented and defined risk-based detection rules (scenarios, thresholds, parameters and segmented target groups) which are maintained, tested and fine-tuned regularly;
- Having in place a robust process for the notification, handling and recording 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; and
- Ensuring that staff are trained to identify unusual or suspicious transactions and flag them as appropriate.
Please do not hesitate to contact Kirsten Debono Huskinson (email@example.com), Kyra Borg (firstname.lastname@example.org) or Peter Mizzi (email@example.com) for further information.