Shaping the Future  A Red Flag is a regulatory-referenced indicator that highlights potential illegal activity in a bank account. Red Flags are created from the knowledge and understanding of patterns that emerge from the analysis of criminal transactional activity. They are then defined according to regulation and guidance notes and assigned to a specific financial crime typology, such as the Illegal Wildlife Trade or Human Trafficking. 

AML Analytics has developed a ground-breaking Red Flag Test solution designed to carry out an on-the-spot transaction monitoring system health check. Our innovative tests will exercise Red Flag rules using Smart Scenarios consisting of synthesised transaction data. Red Flag Tests will identify vulnerabilities in a transaction monitoring system’s alerting capabilities and will validate Red Flags at the click of a button.

Each Smart Scenario encompasses multiple Red Flags and covers different transactional behaviour to emulate the typical characteristics of a particular type of financial crime, such as Modern Slavery, Proliferation Financing, Tax Evasion or Terrorism Financing. Our Red Flag Tests contain synthetic data to mimic the exact transactional patterns of defined money laundering typologies such as the ones mentioned here.

Testing will highlight transaction monitoring system inaccuracies and identify incorrect threshold parameters that can cause a system to produce unnecessary alerts or miss specific behavioural-type transactions.

It will provide the intelligence required by a system technician to understand existing Red Flag assumptions and to then carry out remediation and post-testing enhancement activities to rid a transaction monitoring system of time-wasting inaccuracies. This will enable analysts to identify transactional patterns and behaviours consistent with known money laundering typologies more easily. 

We have collated a unique database of over 10,000 Red Flags that have been defined by Regulators, law enforcement agencies and banking associations around the globe.

AML Analytics is leading international regulatory guidance on Red Flag Tests through specialist research. Our Red Flag Tests and Smart Scenarios have been created in accordance with international best practice recommendations and guidance from the FATF, UNODC, OCC, FinCEN, HKMA, and many others.

Red Flag Testing is also used by Regulators as an integral part of a Thematic Review to test the performance of the transaction monitoring systems used by their regulated entities. 

To find out more, contact a member of the AML Analytics team by clicking on the interactive map

Benefits of Red Flag Testing

•  Our testing is faster, simpler and more cost effective than any other transaction monitoring system testing process on the market

• Testing aligns with and exceeds global regulatory expectation

•  Risks associated with sanction violations and subsequent AML penalties are mitigated

•  Smart Scenarios consisting of synthesised transaction data will stress test and validate varying threshold parameters of Red Flags to ensure compliance

•  Emerging Red Flags and risk indicators which lie outside a financial institution’s existing Red Flag parameters are identified

•  Our testing process does not require any access to a Financial Institution’s systems or customer data

•  No onsite resource or UAT access is needed

Results Analysis

For Red Flag Test and TMV customers, secure login credentials allow access to our web-based transaction monitoring portal that provides a similar function to Analyser Online. It has been developed specifically for transaction monitoring data.

Our portal provides high level overview dashboards and data analytics for each Suspicious and Non-Suspicious Scenario in the form of colour-coded charts and graphs so that a financial institution will be able to understand performance levels and system limitations. 

Drill down into the graphs for a detailed analysis of alerts generated per segment and transaction type, with a level of granularity that is now expected by Regulators. The tool will enable customers to easily identify and analyse hits and misses from each Scenario in a test and facilitate understanding about performance levels and limitations of their transaction monitoring systems.

Our results analysis portal provides full reporting capabilities where all transactional data, entire transaction sequences and overall results can be easily accessed.