Ongoing Monitoring Systems: Components, Procedures & Examples

Is your business ready for the unexpected? In today’s fast-paced and ever-changing business landscape, ongoing monitoring has become a crucial aspect of risk management. Companies need to stay vigilant and adapt quickly to new threats and opportunities.

Ongoing monitoring activities help organizations keep a finger on the pulse of their operations, ensuring they can respond swiftly to potential issues before they escalate into major problems.

Understanding the Need for Ongoing Monitoring

In today’s complex financial landscape, ongoing monitoring has become a crucial component of risk management for businesses. It’s a systematic process that helps companies keep a watchful eye on their customers, transactions, and related activities to detect potential criminal behavior ^[1].

Ongoing monitoring is essential for organizations to comply with these regulations and mitigate the risks associated with financial crimes ^[3].

By implementing effective ongoing monitoring systems, businesses can:

1. Meet international AML standards and requirements ^[1]
2. Proactively identify, assess, and mitigate risks linked to money laundering and terrorist financing ^[1]
3. Enhance their brand image and promote a secure reputation ^[4]
4. Maintain accurate data and ensure compliance ^[1]

Ongoing monitoring helps businesses address several critical risks:

1. Financial crimes: It aids in detecting and preventing money laundering, terrorist financing, and other illicit activities that can threaten the stability of financial markets.
2. Regulatory challenges: Proper monitoring procedures help businesses avoid regulatory issues and potential fines for non-compliance.
3. Reputational damage: Companies that fail to implement adequate monitoring systems may face reputational risks, potentially leading to a loss of business^[4].
4. Economic instability: By combating financial crimes, ongoing monitoring contributes to maintaining economic stability and public trust in the financial system.
5. Loss of correspondent banking relationships: Effective monitoring can help prevent the loss of crucial banking partnerships ^[5].

Key Components of an Effective Monitoring System

To put into action an effective ongoing monitoring system, organizations need to focus on three key components: identifying and assessing risks, implementing controls, and regular monitoring and review.

1. Identifying and Assessing Risks

The first step in creating an effective monitoring system is to identify and assess potential risks. This process involves:

1. Documenting potential risks and categorizing actual risks faced by the business
2. Analyzing the likelihood and potential impact of each risk
3. Prioritizing risks based on their severity and potential for disruption

2. Implementing Controls

Once risks have been identified and assessed, the next step is to implement controls. These are processes, procedures, and safeguards designed to protect company systems and data from breaches and bad actors.

Effective implementation of controls helps:

1. Create common processes across the organization
2. Improve performance through accurate data
3. Increase efficiency by streamlining processes
4. Reduce risk by helping employees securely engage with company systems

• Designing controls that directly tie to identified risks
• Documenting processes and procedures without overburdening employees
• Activating safeguards built into the infrastructure
• Mandating that employees follow new processes and procedures

3. Regular Monitoring and Review

The final component of an effective monitoring system is regular monitoring and review. This ongoing process ensures that the implemented controls remain effective and relevant.

Key aspects of this component include:

1. Continuous evaluation of controls to ensure they’re present and functioning
2. Communication with the board regarding deficiencies and planned corrections
3. Regular risk assessments to adapt to changing risk landscapes

Organizations should consider implementing a quarterly pulse check, which provides an important early warning system and allows for a dynamic response to a dynamic environment ^[7]. This approach helps businesses stay proactive rather than reactive in managing risks.

By focusing on these three key components, organizations can create a robust ongoing monitoring system that helps mitigate risks, ensure compliance, and adapt to changing business environments.

Implementing Ongoing Monitoring Procedures

1. Using Specialized Software Tools

Implementing effective ongoing monitoring systems often involves leveraging specialized software tools. These tools empower DevOps teams with enhanced visibility into application performance, security threats, and compliance concerns ^[8]. They also help with improved risk management across the entire DevOps pipeline.

Many DevOps monitoring tools offer features that cover three key capabilities:

1. Observability: Making data from within the application available and accessible for monitoring and analysis.
2. Monitoring: Collecting, aggregating, and displaying application data for consumption by DevOps teams.
3. Analysis: Manually or automatically investigating application data to extract insights that support various DevOps use cases.

Some popular software tools for ongoing monitoring include:

• Lansweeper: Scans large network sections, providing information on hardware devices, software, licenses, and more.
• Snort: An effective tool for network monitoring, with its effectiveness varying based on placement in the environment.
• Nagios Core: Useful for monitoring networks, devices, and servers, allowing real-time alerting on network hardware ^[9].

2. Employee Training Programs

Training is vital to the success of ongoing monitoring procedures. It introduces new staff to the business and helps existing staff grow professionally and learn new skills ^[10]. Organizations that invest in employee training experience 11% greater profitability than those that don’t^[11].

Effective training programs should include:

1. Industry skills training
2. Transferable skills practice
3. Business process training
4. New employee training

To ensure the effectiveness of training programs, it’s crucial to track employee progress. This can be done through:

• Monitoring a growing knowledge base
• Assessing increased confidence in displaying a skill
• Evaluating the ability to effectively teach others
• Tracking completion of discrete units of training modules

3. Conducting Internal and External Audits

Regular audits are crucial for maintaining effective ongoing monitoring procedures. Internal audits help organizations evaluate and improve the effectiveness of risk management, control, and governance processes ^[12].

Key aspects of conducting audits include:

1. Developing an auditing and monitoring plan based on priority risks identified in the compliance risk assessment.
2. Performing concurrent audits to identify and address potential problems as they arise.
3. Collecting and tracking data for trend analysis and progress measurement ^[13].

Audits can be conducted through various methods:

• On-site visits
• Interviews with personnel from different departments
• Questionnaires to solicit impressions from employees
• Review of written materials and documentation
• Trend analysis in specific areas over a given period ^[14]

By implementing these ongoing monitoring procedures, organizations can stay vigilant, adapt quickly to new threats and opportunities, and ensure compliance with relevant regulations.

Examples of Ongoing Monitoring in Practice

1. Monitoring Client Profiles and Transactions

Effective ongoing monitoring systems often involve scrutinizing client profiles and transactions to detect potentially suspicious activities. One key aspect of this process is reviewing alerts triggered by Anti-Money Laundering Transaction Monitoring Systems (AML-TMS) to identify unusual transaction patterns. This practice helps organizations prevent reputational loss and avoid regulatory fines.

When examining transactions, analysts focus on several crucial factors:

1. Transacting parties’ business profiles
2. Source of funds for the transactions
3. Relationships between transacting parties
4. Ultimate originator and beneficiary details (if applicable)
5. Flow of funds
6. Proper articulation of transactional behavior

2. Compliance Testing and Reporting

To ensure the robustness of ongoing monitoring systems, organizations implement comprehensive compliance testing and reporting procedures. This process typically involves several key steps:

1. Building a requirements library: This includes identifying all statutory, regulatory, and contractual requirements, mapping each requirement to a process or function, and defining potential risks.
2. Performing a compliance risk assessment: This step involves evaluating the inherent risk of each identified process and determining the effectiveness of controls used to mitigate these risks.
3. Developing a compliance testing methodology: This includes defining the parameters of the test, determining how to handle errors or issues, and establishing a process for reporting findings.
4. Building a testing schedule: Organizations determine how often testing should occur based on organizational objectives and identified risks. High-risk issues may be tested monthly, while low-risk issues could be tested quarterly or annually.
5. Initiating an issue management process: When testing identifies issues for remediation, it’s crucial to define how each unit will manage the issue or control gap, from identification through remediation^[15].

By following these practices, organizations can maintain effective ongoing monitoring systems that help mitigate risks, ensure compliance, and adapt to changing business environments.

To wrap up, ongoing monitoring systems are crucial for businesses to stay on top of risks and adapt to changes quickly. These systems help companies keep an eye on their operations, spot potential issues early, and make sure they’re following the rules.

References

[1] globaltraining – November 10). Advancing AML Compliance: Ongoing monitoring and Reporting – GlobalTraining (NIC). Globaltraining (NIC). https://globaltraining.org/nicosia/product/advancing-aml-compliance-ongoing-monitoring-and-reporting/
[2] lawsociety – Anti-money laundering (AML) compliance for small firms. The Law Society. https://www.lawsociety.org.uk/en/topics/anti-money-laundering/aml-compliance-for-small-firms
[3] UNODC – CHAPTER V AML-CFT MECHANISM AND ITS TOOLS. https://www.unodc.org/documents/southeastasiaandpacific/2009/02/TOCAMLO/10-CHAPTER_V.pdf
[4] FATF – RBA Effective Supervision And Enforcement – https://www.fatf-gafi.org/content/dam/fatf-gafi/guidance/RBA-Effective-supervision-and-enforcement.pdf.coredownload.pdf
[5] belizefsc – Ongoing Monitoring – GOS Advisory  GOS Advisory
Ongoing Monitoring https://www.belizefsc.org.bz/gos-advisory-0002-2024-high-risk-and-other-monitored-jurisdictions-identified-by-fatf/
[6] finra – Anti-Money laundering (AML).  FINRA.org. https://www.finra.org/rules-guidance/key-topics/aml
[7] jersevfsc – ON-GOING MONITORING: SCRUTINY OF TRANSACTIONS & ACTIVITY – https://www.jerseyfsc.org/media/1820/section-6-ongoing-monitoring.pdf
[8] rulebook – Ongoing Monitoring | CBUAE Rulebook. https://rulebook.centralbank.ae/en/rulebook/441-ongoing-monitoring
[9] infosecinstitute – Top 10 tools for continuous monitoring | Infosec. https://www.infosecinstitute.com/resources/network-security-101/top-10-tools-for-continuous-monitoring/
[10] tainingmag – The importance of tracking employee training progress. Training. https://trainingmag.com/the-importance-of-tracking-employee-training-progress/
[11] hkcipa – AML monitoring. Hong Kong Institute of Certified Public Accountants. https://www.hkicpa.org.hk/en/Tools/FAQ/Quality-assurance/Practice-review—AML-Monitoring
[12] fatf -High-risk and other monitored jurisdictions.  https://www.fatf-gafi.org/en/topics/high-risk-and-other-monitored-jurisdictions.html
[13] complaincecosmos -Chapter 7. Monitoring, Auditing, and Reporting. COSMOS Compliance Universe. https://compliancecosmos.org/chapter-7-monitoring-auditing-and-reporting
[14] crisil – Case Study – AML Operations – https://www.crisil.com/content/dam/crisil/our-businesses/global-research-and-analytics/risk-and-analytics/financial-crime-analytics-capabilities/case-study/aml-operations.pdf
[15] bis -Basel Committee on Banking Supervision – https://www.bis.org/publ/bcbs252.pdf