Merchant Monitoring vs Transaction Monitoring
We’re often asked what the difference is between transaction monitoring and merchant monitoring — aren’t they the same thing? Read further to understand how they work together, what transaction monitoring is, and what merchant monitoring is. Then, contact us.
What Transaction Monitoring Is and Why It’s Important
For companies that process payments, it’s important to be vigilant about watching out for merchants engaged in fraud, illicit activity, or behavior that can cause chargebacks.
Transaction monitoring is the process of identifying suspicious payments transactions, usually using a combination of technology and human review. Transaction monitoring is a component of compliance with due diligence requirements and is monitored at the transaction level by the institution or payment processor in order to protect against money laundering as well as other forms of fraud or activities that violate a company’s policies.
Transaction Monitoring is an AML/CTF Regulatory Requirement
Anti-money laundering (AML) “refers to the web of laws, regulations, and procedures aimed at uncovering efforts to disguise illicit funds as legitimate income.” This includes anti-money laundering/combating the financing of terrorism (AML/CTF) regulations and/or guidelines.
According to the Financial Crime Academy, “the purpose of monitoring transactions is to understand the nature and purpose of a particular transaction and to avoid the risks of money laundering and terrorist financing.” Furthermore, “transaction monitoring involves the ongoing review of customer transactions and activities to identify and investigate any suspicious or unusual behavior,” and it’s required by AML/CTF regulatory guidelines.
How Transaction Monitoring Differs from Merchant Monitoring
Transaction monitoring is sometimes confused with merchant monitoring, which assesses risk at the merchant level rather than the transaction level. This solution helps to monitor merchants engaged in both low- and high-risk industries to help payment service providers avoid BRAM and VIRP fines.
Merchant monitoring can help identify risk that transaction monitoring would miss by reviewing merchant’s websites and wider web presence. It takes a more holistic view of merchant activity and can identify associated networks.
Another valuable feature of merchant monitoring is its ability to detect transaction laundering, a form of fraud in which a seller acquires a merchant account for one purposes but uses it to process payments for another, usually illicit purpose. Although transaction laundering could be considered a part of the AML umbrella, it is different from traditional money laundering and requires specialized expertise.
It’s best to utilize both transaction monitoring and merchant monitoring to mitigate risk while confidently growing your merchant portfolio.
LegitScript Merchant Monitoring Works Hand in Hand with Your Transaction Monitoring Efforts
Are you concerned about detecting transaction laundering networks in your merchant portfolio and mitigating other forms of merchant risk? Discover how LegitScript Merchant Monitoring is the only solution combining big data, skilled analysts, and regulatory experts to quickly detect and remove merchant risk — without making you sift through a spreadsheet of false positives.
Contact us to learn more.