How AI-Assisted Transaction Monitoring Saves Financial Loss


Financial loss refers to the financial damage faced by an individual, company, or organization. These losses can include the depreciation of assets, a reduction in revenue or income, or an increase in expenses that exceed the net income. An economic insight report suggests that half a million small businesses in the UK are at a risk of financial loss. This would result in a £12 billion loss for the UK economy. Effective financial management is essential to minimize the likelihood of such losses. If the financial management is adequate and error-free, the probability of experiencing a financial loss will also be low.

Why Financial Loss is a Business Killer

Unexpected financial losses can degrade a company’s financial health and impact its viability. As investors and stakeholders are solely focused on monitoring a business’s performance and financial health, a decline in either may force them to pull out their investments and lose faith in the company’s future prospects. Financial losses can cause a fall in stock prices, leading to a decrease in the company’s market capitalization. This directly impacts its credit scores, and if the financial loss is grave and the company’s creditworthiness falls below the credit score threshold, it might have to declare bankruptcy.

Digital Financial Management

The first thing that businesses need to do to minimize financial losses is manage their finances digitally instead of creating manual databases. This gives them the edge in accuracy and real-time financial monitoring. This way, business officials can refer to their financial records on demand at any time and stay up-to-date about their financial performance. This allows them to make informed business financial decisions and prioritize the necessary aspects.

Digital financial management includes processes ranging from online banking and automated bookkeeping to online tax filing and fraud protection.

Financial Loss Prevention with AI

To prevent financial losses, many SAAS companies provide “Risk Mitigating Financial Services,” a framework of different financial compliance and risk management solutions designed for a business’s specific needs. These solutions include Transaction Monitoring, Know Your Transaction (KYT), Know Your Customer (KYC), Customer Due Diligence (CDD), and Suspicious Activity Reporting (SAR) services. These services allow businesses to monitor the activities of their customers and clients to ensure their legality and protection.

These services are automated and can be integrated with Artificial Intelligence (AI), which takes the automation a step further and allows businesses to completely eliminate manual financial monitoring and ultimately avoid financial risks.

KYC Services: Advanced Identity Verification

Know Your Customer (KYC) services are advanced tools businesses use to verify the identity of the customers or clients carrying out financial processes within their infrastructure. The main objective of KYC solutions is to protect a business’s financial processes by preventing financial crimes such as money laundering and fraud, which builds credibility and improves trust.

KYC solutions extract essential information like name, date of birth, residential address, contact details, and government-issued identification documents from customers during customer onboarding. These documents are then passed through various verification processes to ensure their accuracy and authenticity. AI-integrated KYC services automatically flag suspicious behaviours.

KYT-Solutions: Transaction Monitoring

KYT solutions are used to monitor and provide more information on the transactions carried out by individual customers. These solutions monitor inbound and outbound transactions in real time. They assess the aspects of a transaction, such as its origin, destination, transaction amount, counterparties, purpose, and other legal transaction histories, to verify its legitimacy.

These software solutions are provided by SAAS companies, which makes them highly cost-effective and time-efficient. They save business owners the hassle of hiring physical staff for transaction monitoring and free them from worrying about the risk of manual errors caused during the monitoring. Software solutions integrated with AI use advanced data analysis techniques to provide accurate and precise data at all times. Businesses operating on all scales, even small businesses with limited resources, can now adopt AI-integrated transaction monitoring and safeguard their business finances.

How It Prevents Financial Loss

KYT verification systems offer various services that help eliminate the risk of financial loss.

● Real-Time Monitoring

KYT solutions provide users with interactive dashboards and graphs with real-time financial metrics on display. This allows for on-demand financial monitoring. Business owners can access these dashboards from anywhere and stay up-to-date on the financial processes being carried out. This allows for informed and aware financial decision-making and immediate action in the event of any risk alert. This timely action is critical to preventing financial loss.

● Risk Scoring

KYT services have a risk scoring system that assigns risk scores to transactions and automatically flags suspicious ones. This system is primarily based on pattern recognition, KYT solutions are integrated with advanced Machine Learning (ML) and Artificial Intelligence (AI), which allows them to identify suspicious transactions in the database and create patterns based on them. These patterns can then be used as pre-defined criteria to flag similar transactions in the future. Thus, blocking suspicious transactions beforehand can save businesses from financial losses.

● Customer Due Diligence (CDD)

It is the process by which KYT services determine the risk level of customers carrying out transactions. It is mainly used for high-priority customers, i.e., customers involved in transactions that involve large amounts. These customers are subjected to CDD screening. The data gained through this screening can be used to mitigate risks and illegal transactions, avoiding financial losses.

Traditional CDD screening was conducted manually, and customers were often dissatisfied because of its time-consuming and intrusive nature. AI-integrated KYT solutions conduct this process at the back end and automate it to smooth it further out.

● Reduced Chargebacks

Transaction monitoring can be used to avoid false calls of disrupted transactions and the financial loss of false refunds. By monitoring the user’s transactions, KYT services can determine whether the mistake was on the user’s end or the business’s end. This way, companies can significantly reduce the number of refund chargebacks they receive.

● Adaptive Learning – Fraud Detection

AI-integrated KYT solutions are versatile and adaptive. They can identify patterns and develop user and transaction profiles to predict whether a transaction is at risk of fraud or whether the transaction itself is a scam or fraud. The transactions that fit the profile of suspicious transactions are flagged or blocked automatically, preventing them beforehand and avoiding potential financial loss.

● Compliance with Regulations

AI-integrated KYT solutions can help businesses stay compliant with the laws and regulations of the country or jurisdiction they’re conducting business in. By implementing AML and CFT programs, it is possible to automatically generate Suspicious Activity Reports (SARs) and detect money laundering and counter-terrorism financing instances. This provides further security protocols for the business’s financial data.

These criminal activities are identified and prevented beforehand because of the assistance of AI. This helps businesses avoid hefty fines and financial penalties.

● Fraud Detection

KYT software solutions can identify and prevent unauthorized transactions, account takeovers, and payment fraud by implementing countermeasures because of their AI-assisted pattern recognition and prevention solutions. By detecting fraud and scams early on, businesses can avoid financial losses and protect their assets.

● Watchlist Screening

AI-integrated transaction monitoring is continuous and can scan legally available global watchlists and records within seconds and gather information on a transaction being carried out. This can help assign a high-risk rating to transactions that are added to these watchlists and labeled as flagged. This helps businesses avoid potential risks that can lead to financial loss.

● Avoid Scams

Transaction monitoring can help businesses avoid scams, as they are a huge factor in their financial losses. These software solutions use link analysis to determine whether the transaction being carried out is using a fake proxy or identity to carry out a scam or not. Enhanced Due Diligence (EDD) is implemented to gather further information on the perpetrator, which helps flag and block them. Moreover, they also possess the ability to report these frauds and scams to legal bodies for further action.

● Scalability and Flexibility

KYT software solutions are highly scalable and flexible. They can be adjusted according to a business’s specific needs. They function on a cloud-based infrastructure, which allows them to process fluctuating data volumes smoothly. Users can integrate these solutions with their current financial management systems, consolidating all their financial processes into one central location. The solutions are customizable, and businesses can establish their own limits and flagged behaviors. They can also adapt to changing regulations and automatically adjust the business’s processes to ensure compliance.

KYT:  A Full-Scale Solution to Financial Loss

KYT leverages advanced technologies, including artificial intelligence (AI), machine learning, data analysis, and big data processing, to provide real-time transaction monitoring. This enables businesses to detect and respond swiftly to any suspicious activities or anomalies present in their financial processes. This reduces the risk of financial losses resulting from money laundering, fraud, or other illicit transactions. KYT continuously monitors transactions, customer behavior, and external data sources, which helps identify potential risks beforehand and take immediate action. Most KYT solutions are AI-assisted, which automates both risk identification and subsequent required actions. KYT transaction monitoring is an essential tool for businesses to reduce the risk of financial losses.

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