Coredo

When an entrepreneur asks me which is faster: to set up a new entity or to buy a ready-made financial company in the EU, I always answer the same: the speed of the deal means nothing without quality Due Diligence. This is where those who treat the review not as a formality but as an investment in their future business win.

And conversely: where the COREDO team conducted a comprehensive company review, the client entered the deal knowingly, with a clear understanding of the risks, a fair price and workable guarantees from the seller.

Due Diligence when purchasing a financial company in the EU

Ready-made financial companies in Europe are not just a “shell with a license”. They are:

• existing obligations to regulators and tax authorities;
• transaction history, clients and counterparties;
• executed contracts and legal risks;
• internal control systems and AML procedures;
• reputation in the market and with supervisory authorities.

When acquiring a company in Europe you buy all of this at once, along with the potential problems of the previous owner.

That is why I view financial due diligence, legal due diligence and tax due diligence not as three separate services, but as a single comprehensive review of the company in which the components are closely connected.

Express analysis or full due diligence: how to choose?

At COREDO we conventionally divide checks into two levels:

Express due diligence analysis

I use the express format when:

• the client needs to quickly assess the feasibility of the transaction;
• there are several targets for purchasing a ready company in the EU and a preliminary ranking is required;
• the budget at the first stage is limited, but it is necessary to weed out clearly problematic options.

As a rule, express due diligence analysis includes:

• basic review of corporate documents;
• initial check for ongoing litigation and public sanctions;
• review of licenses and permits;
• overview of key financial statements and indicators;
• initial assessment of the company’s legal cleanliness and obvious tax risks when buying the company.

When due diligence is unavoidable

I consider full due diligence mandatory if:

• the target is a licensed financial company (payment institution, electronic money institution, investment firm, crypto company CASP/VASP, etc.);
• the buyer intends to use the company as a strategic asset — developing it, scaling it, attracting investors;
• the deal size is significant, and an error would be critical for the business.

In a full due diligence we include:

• detailed financial due diligence;
• in-depth legal due diligence;
• a separate tax analysis block;
• review of the internal control system, AML/KYC procedures, governance;
• assessment of market position and business model.

Structure of due diligence for a financial company

When the COREDO team gets involved in a project to review a ready-made company in the EU, I look at it across several key areas.

Legal due diligence: verifying the transaction’s integrity

What’s included:

• Review of corporate documents
  • charter, articles of association, resolutions and minutes of governing bodies;
  • ownership and control structure, beneficiaries;
  • existence of restrictions or encumbrances on shares/stakes;
  • history of changes in members/shareholders and directors.
• Analysis of the company’s contracts and liabilities
  • agreements with key clients and counterparties;
  • agreements with IT infrastructure providers, PSPs, banks;
  • leases, outsourcing, white label, agency agreements;
  • pledges, guarantees, sureties.
• Review of the company’s history and litigation
  • current and past legal disputes;
  • administrative cases, regulatory fines;
  • investigations in AML/sanctions, claims by supervisory authorities.
• Intellectual property and IT assets
  • rights to software, domains, trademarks;
  • license agreements;
  • confidentiality and trade secret regime.

The result of this section: an understanding of to what extent the company’s legal soundness meets the buyer’s expectations and what set of warranties and representations from the seller will be required in the SPA.

Financial due diligence: numbers and debts

Main elements:

• Review of the company’s financial condition
  • analysis of financial statements for 2–3 years;
  • revenue, gross and operating profit;
  • expense structure and margins.
• Assessment of working capital
  • level and composition of accounts receivable and payable;
  • policy for provisioning doubtful debts;
  • presence of problematic or “stalled” positions.
• Net debt and debt burden
  • loans, borrowings, financial leasing;
  • intragroup obligations;
  • structure and cost of debt capital.
• Adequacy of reserves when acquiring a company
  • reserves for legal disputes;
  • reserves for disputed taxes;
  • assessment of potential “off‑balance” risks.
• Analysis of the actual operational activity
  • consistency of turnover with the business model;
  • relationship between actual cash flows and those reported in the financial statements;
  • check for “inflated” turnover or artificial profit before sale.

The task of this stage is to give the buyer an honest answer: how sustainable the current financial picture is and whether there are any “time bombs” in the form of concealed liabilities.

Tax due diligence: main risks

Tax risks when acquiring a company in the EU are often underestimated, especially when it comes to cross-border structures involving multiple jurisdictions.

In the tax section we include:

• analysis of tax returns and calculations for main taxes over several years;
• reconciliation of the tax base and financial statements;
• checks of correct application of exemptions and special regimes;
• assessment of cross-border transfer pricing schemes and intra-group services;
• identification of potential unrecognized tax liabilities.

In practice, three instruments are used:

• adjustment of the deal financing structure (debt/equity, earn‑out, deferred payments);
• tax-optimized structuring of ownership (holdings, jurisdictions in the EU and third countries);
• inclusion in the SPA of specific tax warranties and representations by the seller and compensation mechanisms.

AML and internal control in financial companies

The COREDO team regularly provides AML consulting and support to financial institutions, so in such transactions we always check:

• existing AML policies/CFT, KYC, sanctions control;
• risk‑based approach procedures, client categorization;
• work of the compliance officer and the internal audit function;
• quality of client files and completeness of KYC documentation;
• existence and content of reporting to regulators;
• cases of blocks, refusals to provide services, regulator inquiries.

This section allows us to assess:

• how compliant the company is with regulatory requirements;
• whether there is a risk of sanctions or license revocation;
• how easily the company can be integrated into your existing compliance system.

personnel management in the organization

I always pay attention to:

• management structure and allocation of functions;
• key employees: directors, MLRO/AML officer, heads of departments;
• motivation system and the risk of critical personnel leaving after the deal;
• presence of internal regulations and KPIs.

Market position and business model

For financial companies in Europe, especially with EMI/PI or CASP/VASP licenses, I always look at:

• assessment of the target company’s market position;
• structure of the client base;
• dependence on individual providers or partners;
• sustainability of the business model and its scalability.

Two-stage process: data collection and negotiations

Stage 1. Initial collection and rapid analysis

At this stage I:

• compile the list of documents to be analyzed;
• organize access to the data room (electronic document archive);
• conduct an initial screening for red flags: litigation, sanctions, regulatory risks, major tax inconsistencies.

• either walk away from the deal;
• or radically revise its structure and price.

In-depth analysis and conclusions

After the initial filter, the COREDO team proceeds to detailed examination:

• all material contracts;
• financial metrics and calculations;
• internal procedures and control systems.

The result is a due diligence report:

• a detailed opinion for each section;
• a list of identified risks and their likelihoods;
• an assessment of investment risks and possible consequences;
• recommendations for minimizing the impact of risks and mitigating them.

How to use due diligence to your advantage

Revising the price and terms of the deal

• adjust the transaction price and guarantees;
• request additional guarantees and seller’s representations;
• require withholding part of the payment in escrow until certain risks are remedied;
• initiate a review of payment terms based on the DD findings (deferment, earn‑out, partial buy‑out).

Structure of deal financing

Based on the review:

• the financing structure of the deal changes (balance of equity and debt);
• covenant terms for banks and investors are determined;
• a tax‑efficient ownership structure is formed.

Enter the deal or walk away

Due diligence for financial companies in the EU

Unlike classic M&A in the real sector, due diligence of financial companies in the EU has its own specifics:

• mandatory verification of licenses and compliance with regulator requirements;
• analysis of interactions with correspondent banks and payment providers;
• review of the history of regulatory inspections and any enforcement orders;
• assessment of reputation in the market and in the professional community.

The COREDO team regularly supports clients in obtaining financial licenses in EU countries, the United Kingdom, Singapore, and also supports transactions for the sale of companies. This experience helps us see which requirements are particularly sensitive for specific jurisdictions and segments (EMI/PI, investment firms, crypto companies).

How to prepare for due diligence

Based on my experience, I will outline a few recommendations that help entrepreneurs and chief financial officers navigate the acquisition of an established company in the EU in an informed manner:

1. Engage experts early. The ideal time is before signing the LOI or at its stage, with clear provisions preserving the right to withdraw from the deal based on the results of the due diligence.
2. Decide on the format: express or full. For initial target screening an express analysis is sufficient; for the final selection and price negotiations, only a full due diligence.
3. Discuss access to data with the seller right away. A transparent, well-structured data room is a good indicator of the seller’s good faith.
4. Focus on critical risk areas. For financial companies these include: licenses, AML/KYC, taxes, litigation, debt burden, client structure.
5. Use the findings of due diligence in negotiations. A quality report is an argument, not just a box-ticking exercise.
6. Plan integration in advance. Based on the review results, you should immediately develop a plan: changes to governance, updating policies, revising contracts, strengthening compliance.

How COREDO helps you navigate the process

Since 2016 COREDO has supported international business in company formation, licensing and legal Due Diligence in Europe, Asia and the CIS.

• understands the specifics of financial licenses and regulatory requirements;
• combines legal, financial and tax due diligence within a single team;
• is able to integrate the review with the subsequent deal structure and post-sale support.

In a typical due diligence project for a financial company in the EU the COREDO team:

• analyzes the legal status and corporate structure;
• conducts a financial review of the company and its financial statements;
• assesses the tax risks of the transaction target and options for their mitigation;
• checks the internal control system of the target company and its AML procedures;
• prepares a clear report for owners and investors, prioritizing risks;
• helps use the findings in negotiations and in the contract structure.

When a manager sees not only a list of risks, but also a clear plan for how to mitigate them, how to structure financing and which seller guarantees to request: the deal stops being a lottery and becomes a manageable process.

Over the years of COREDO‘s work with international banks in Europe and Asia I have seen that the key mistake businesses make is to treat a refusal as the final point. In fact, it is a signal: your profile in the bank’s eyes and your internal compliance system do not match its risk appetite. That means this can and should be managed.

In this article I will explain how to:

• interpret a bank’s refusal to open a company’s current account and a subsequent refusal by the bank to service the business;
• prepare for initial and repeat onboarding at the bank;
• reduce the risks of a company’s account being blocked in the long term;
• build systematic AML support for companies and an internal compliance that banks perceive as an asset rather than a problem.

Reasons a bank might refuse a loan

The phrase “refusal without explanation” protects the bank from disputes and from revealing risk-management methodologies. But there are almost always reasons. In COREDO’s practice, five blocks are most common.

Jurisdictional and industry risks

The bank assesses:

• the country of company registration;
• the country of tax residency of the beneficiaries;
• the countries of counterparties and the geography of payments;
• the industry (fintech, crypto, gambling, forex, PSP, cross-border e-commerce, etc.).

In one COREDO case we structured a group where the holding was located in a neutral European jurisdiction, the operating companies were in Asia, and the clients were worldwide. Without explaining the logic of the structure and documenting the economic rationale of the operations for the bank, it looked like a set of “shell” companies. After preparing a detailed diagram of business processes, substance and tax logic, the bank not only approved the account but also expanded the limits after several months of operation.

Ownership and beneficiary structure

The bank considers important:

• whether there is a clear ultimate beneficial owner (UBO);
• whether there is an excessive number of ownership layers;
• whether trusts, foundations, or nominee structures are present;
• whether there are PEP / sanction risks, negative news.

In such cases the COREDO team often adjusts the ownership structure for bank onboarding: we simplify levels, bring the UBO “into the light”, and document connections and sources of funds.

Business model and transactional profile

A bank’s scoring of a corporate client today relies not only on the industry but also on the expected transactional pattern:

• payment volumes and frequency;
• share of cross-border transfers;
• currencies;
• types of counterparties and jurisdictions.

In COREDO’s practice there was a client: a payment intermediary with a history of high chargebacks and disputed transactions at the previous PSP. We conducted a legal audit of the company before submitting the bank application, rebuilt the contractual base with merchants, implemented an anti-fraud policy and prepared an evidence base to justify the legality of revenues. After that, reopening an account after a compliance refusal became possible at another European bank.

Client history and external signals

Banks widely use:

• negative news screening and reputational risk;
• public registers, court cases, media;
• internal and external watchlists/blacklists.

We encountered the case “client on another bank’s blacklist: what to do”: we collected documents explaining the past case (an erroneous alert on a transaction, incorrect interpretation of a counterparty), and prepared a separate memorandum for the new bank, minimizing the risk of inclusion in the bank’s internal blacklist already at the application stage.

Bank risk appetite and scorecard

Even a legally perfect structure may not pass a bank’s internal scorecard for assessing corporate clients.

What to do in case of a bank refusal?

If a bank refusal occurs without explanation, the company has three key tasks:

1. record the consequences (and not worsen the situation);
2. understand what exactly triggered it;
3. set up a repeat onboarding after the bank refusal – either with the same bank or with another bank.

Maintaining control of the situation

Practical minimum:

• do not argue emotionally with the bank and do not ‘press’ for disclosure of reasons;
• request a written notice of refusal/account closure (if the bank issues one);
• clarify the account closure timeframe and the procedure for withdrawing funds;
• record in your system the date and circumstances of the refusal – this will be useful when analyzing the bank refusal and preparing for repeat onboarding.

Internal due diligence of the company

Before applying to a new bank, it is important to:

• conduct a legal audit of the company before submitting the application to the bank;
• assess how your company appears through the lens of AML/KYC:
  • beneficiaries;
  • contractual framework;
  • counterparty policy;
  • source of funds / source of wealth;
  • transaction and blocking history.

The COREDO team often models a bank’s risk assessment of a client: we apply an approach similar to the bank’s logic, analyzing jurisdiction, industry, reputation, media screening, structure, and transactions. This allows us to see in advance which alerts will be triggered in a bank’s scoring of a corporate client.

How to create a transparent picture of the business

Internal package to prepare before contacting the bank:

• corporate documents;
• ownership structure with a visual diagram;
• description of the business model and the value chain;
• key contracts;
• policy for working with counterparties;
• financial statements.

Strategy for repeat onboarding

After the internal audit, the question arises: where exactly to undergo secondary onboarding after a bank refusal. Options:

• the same bank (if the refusal is related to missing documents or incomplete disclosure of information);
• another bank in the same jurisdiction;
• a bank in another country, with a different risk appetite;
• a combination of a traditional bank and EMI/fintech solutions (as part of a ‘multibanking’ strategy).

How to prepare for onboarding at a foreign bank

Onboarding of corporate clients in Europe and Asia today is not just filling out a form. It is a comprehensive check of KYC/KYB, transactional logic, substance and reputation.

Documents for bank onboarding

Standard package:

• incorporation documents;
• register of shareholders / UBO;
• documents of directors and beneficial owners (ID, proof of address);
• description of activities and business plan;
• key contracts;
• financial statements and tax filings (if there is a history).

For companies with elevated risk: additionally:

• confirmation of economic substance (office, employees, real operations);
• company policy & procedures on AML/KYC;
• internal policies on counterparties and transactions;
• description of transaction monitoring systems / transaction monitoring within the company.

The COREDO team regularly prepares KYC packages for clients for foreign banks: from corporate document templates to business description phrasing that is clear to a compliance officer.

KYC for legal entities and KYB

In KYC for legal entities and KYB procedures the bank checks:

• who the ultimate beneficial owners and controlling persons are;
• whether there are nominee shareholders without a real economic role;
• whether the stated activity corresponds to the contract base;
• whether there is confirmation of source of funds / source of wealth.

Therefore one of the key areas of COREDO’s AML consulting is the adjustment of contracts and business processes to AML requirements/KYC, so that the business appears to the bank exactly as it operates in reality.

How to prepare for digital onboarding

With the growth of digital onboarding / remote onboarding, banks’ requirements for the quality of data and documents have tightened. Automated systems:

• analyze documents for forgeries;
• cross-check data with external registries;
• immediately run screening against sanctions lists and PEPs;
• apply pre-configured risk scoring models based on transaction patterns.

To reduce the risk of rejection during remote onboarding, at COREDO we:

• prepare documents in advance in formats that are easily read by systems;
• fill out questionnaires so they are consistent with each other and with corporate documents;
• prepare the client for possible re-identification by the bank, video interviews and follow-up questions.

Bank’s refusal to serve a company

Bank refusal to serve an operating company and the subsequent offboarding of the client (bank delisting) is one of the most painful scenarios.

Reasons for blocks and offboarding

Typical triggers:

• a sharp increase in turnover without prior notice;
• a change in the geography of payments (for example, a mass entry into new markets);
• an increase in the share of cross-border payments;
• transactions atypical for the previously observed profile.

How to communicate with the bank after a refusal

If a refusal has nevertheless occurred, at COREDO we almost always recommend that the client develop a communication strategy with the bank after the refusal:

• record exactly which questions compliance raised;
• prepare a structured package of responses and documents;
• if possible, request a formal reconsideration (if there are grounds).

How to reduce the risk of compliance rejections

Mature businesses today perceive banking compliance support services not as «additional expenses», but as an investment in access to the financial infrastructure.

Which internal policies do banks need?

From COREDO’s practice, the minimum looks like this:

• AML policy and procedures (KYC/KYB, handling high-risk counterparties, sanctions lists);
• transaction monitoring policy;
• procedure for responding to requests from banks and regulators;
• a documented policy on sources of funds and confirmations of beneficiaries’ incomes;
• a retention policy for documents and the evidentiary record.

How to manage a bank’s reputational risk

Banks pay special attention to:

• beneficial owners’ public profile;
• media mentions;
• litigation and regulatory cases.

Multibanking strategy and choice of jurisdictions

One of the most practical takeaways we advise our clients is: don’t build your business relying on a single bank. Especially when it comes to an international group of companies.

Why do businesses need multibanking?

How to choose banks in Europe and Asia

Our experience at COREDO has shown that for companies from the CIS operating in the EU and Asia, it’s important to consider:

• real economic substance in the chosen country;
• transparency of the tax model;
• the presence of a direct and clear beneficial owner;
• the bank’s sector policy.

How to minimize rejections during COREDO onboarding

I’ll outline, in practical terms, how the COREDO team typically gets involved in projects where there is already a refusal to open a corporate bank account or a risk of delisting.

Site audit and strategy

1. Legal and compliance audit: structure, contracts, beneficiaries, transactions.
2. Modeling bank scoring for a corporate client across different jurisdictions and types of banks.
3. Developing a strategy:
   • we adapt the business model and structure to the requirements of target banks (restructuring the business model to meet the bank’s requirements);
   • or we choose financial institutions whose risk appetite better matches the company’s current profile.

KYC dossier and onboarding: preparation

The COREDO team has carried out dozens of projects where the key to success was the careful preparation of the KYC package for a foreign bank:

• we prepare a package of documents and business descriptions;
• we work out responses to standard and complex questions from compliance officers;
• we prepare a guide for an in-depth compliance interview with the bank;
• we manage communications until a decision is reached.

AML support for companies

A separate area: support after account opening:

• assistance in responding to regular queries about transactions and counterparties;
• documenting changes (change of beneficiaries, changes to the structure, expansion of payment geography);
• preparing for limit increases or the addition of new products.

To summarize my experience since 2016, resilience to bank rejections is not about “finding the one right bank”, but about building your business, structure and processes so that banks see you as a predictable, manageable and understandable partner.

To summarize my experience as the founder of COREDO, most questions and problems for international businesses today arise not from company registration or even from obtaining a license, but from how to move forward in a world of continuous transaction monitoring and strict AML compliance requirements.

An entrepreneur sees one thing: “the payment was delayed again”, “the bank requested a package of documents”, “the client’s wallet is blocked pending investigation”.
But here’s what’s happening behind the scenes: a complex AML transaction monitoring system, hundreds of AML rules, dozens of AML scenarios, thousands of AML alerts daily and a constant struggle between risk and customer experience.

1. which typical suspicious transaction monitoring scenarios most often trigger alerts;
2. how these scenarios look from the perspective of a bank/fintech/licensed company;
3. what an owner or chief financial officer can do to reduce the number of unnecessary alerts without exposing the business to regulatory risk.

I base this on COREDO’s real-world practice: company registration in the EU and Asia, obtaining financial licenses, setting up AML functions and supporting clients in the Czech Republic, Slovakia, Cyprus, Estonia, the United Kingdom, Singapore, Dubai and other jurisdictions.

Why a payment ends up in AML monitoring

Any bank, fintech, payment institution, crypto exchange or virtual asset service provider is required to have a functioning anti-money laundering monitoring system. This is not “desirable”, but a direct requirement of regulators in the EU, the United Kingdom, Singapore, the UAE, and many countries in Asia and the CIS.

Inside such a system there are always three layers:

• KYC and transaction monitoring
  Customer profile, customer risk rating, customer behavior profile, expected turnover and expected transaction pattern. It is precisely through the combination KYC + transaction monitoring that the system determines whether this transaction is normal for a specific customer.
• Rule-based / scenario-based transaction monitoring
  A set of aml scenarios and aml rules that catch unusual transaction patterns, high-risk transactions, cross-border transactions with increased risk, operations with high-risk jurisdictions, PEPs and sanctions alerts, etc.
• Alert handling & investigations
  Generation of transaction monitoring alerts, their prioritization, investigation, escalation, and, if necessary, submission of a suspicious activity report (SAR) to the financial intelligence unit (FIU) and a full aml transaction monitoring audit trail.

Common scenarios that trigger AML alerts

Typical scenarios that most often trigger AML alerts are recurring patterns of client behavior and transactions that automated systems recognize as potentially suspicious operations. By breaking down scenarios such as structuring / smurfing and payment fragmentation, it is easier to understand why alerts fire on them more often and how the compliance team responds.

I am designed to:

• Synthesize information from search results
• Answer users’ informational questions
• Provide analytics based on factual data

• the client regularly makes many small payments,
• each of them just below formal AML transaction thresholds,
• in total over a short period this is a significant volume.

Systems see such smurfing / structuring alerts as:

• frequent operations for similar amounts;
• splitting a single logical payment into a chain of small ones;
• fragmentation between related accounts or related-party transactions.

Key to reducing false positives:
clearly document transaction profiling, the business rationale for structuring, and agree this with the bank/provider.

Rapid turnover of funds in the account

Rapid movement of funds alerts occur when money:

• arrives and leaves almost immediately;
• moves quickly through several accounts;
• pass through complex chains (back-to-back, round-tripping funds, mirror transactions).

Common triggers:

• intra-group transactions monitoring between related companies;
• rapid turnover through corporate accounts with a small balance;
• a sudden increase in turnover without a clear explanation.

What helps:

• a documented customer behavior profile and a description of business cycles;
• transparent contracts, invoices, and supply chain payment risk logic;
• pre-configuring scenarios for the client type: trade, fintech, payment provider, etc.

Unusual geography and high-risk jurisdictions

One of the most frequent questions from clients:
“Why does a payment to a new country immediately trigger an alert?”

The system monitors:

• the sender’s and recipient’s countries;
• correspondent banks (correspondent banking risk, nested relationships risk);
• links to sanctioned or offshore jurisdictions;
• sharp changes in geography (yesterday – only the EU, today – payments to several high-risk jurisdictions simultaneously).

The right strategy:

• adapt AML scenarios in advance taking into account regional typologies Europe / Asia / Africa;
• conduct an AML risk assessment for new directions;
• update the customer risk rating taking into account new countries and products.

Dormant account reactivation: sudden reactivation

Dormant account reactivation alerts: one of the most underestimated yet dangerous scenarios:

• the account was unused for a long time;
• then large or numerous transactions occur in a short period;
• especially if the nature of the transactions or the geography changes.

This can be inconvenient for the business: the company “unfroze” one of its old accounts in Europe, started new operations – and received a series of AML alerts and requests for documents.

• pre-notification of the planned account reactivation;
• description of the new expected transaction pattern;
• if necessary – updating KYC and enhanced Due Diligence (EDD).

Large transactions and high risks

Large value transaction alerts trigger when value-based thresholds are exceeded, often in combination with:

• non-standard counterparties;
• high-risk industries (gaming, gambling, certain MCCs, cash-intensive businesses);
• an unusual currency or jurisdiction;
• an unusual frequency of large transactions.

For a corporate client it is critical here:

• describe limits and typical amounts in advance;
• provide transparent documents for key contracts;
• monitor so that one-off large transactions nseemed like an inexplicable “bulging” of the turn.

Crypto and virtual assets in banking

A topic that has come up more frequently in COREDO’s practice in recent years – cryptocurrency transaction monitoring, virtual asset service provider aml monitoring and on-ramp / off-ramp transaction monitoring.

Triggers:

• regular transfers to crypto exchanges and back;
• fiat payments to unknown VASPs;
• transactions involving stablecoins and DeFi monitoring through custodial wallets;
• transfers related to high-risk exchanges or anonymizing services.

• virtual assets and crypto exchanges risk;
• source of funds and beneficial ownership transparency;
• risks of layering and the integration stage of money laundering through crypto instruments.

• specialized scenarios for crypto-related transaction monitoring;
• device and channel analysis in AML (web, mobile, API);
• integration with blockchain data providers and high-risk address lists.

Customer behavior in AML alerts

With modern regulatory expectations, a single simple set of rules «if amount > X, generate an alert» is no longer enough. The following come into play:

• customer behavior monitoring AML;
• transaction frequency analysis and velocity checks in transaction monitoring;
• behavioral analytics in transaction monitoring and anomaly detection in AML monitoring.

The system looks not only at absolute amounts, but also at:

• deviations from the customer behavior profile;
• out-of-pattern transactions;
• seasonality and cyclicality of transactions;
• correlation with new products or markets.

How the AML transaction monitoring system works

An entrepreneur needs to understand not only the scenarios themselves but also how the system operates as a whole.

Rule-based or machine learning?

In COREDO’s real projects for implementing and configuring systems for banks, fintechs and payment institutions, a hybrid model is most often used:

• rule-based transaction monitoring
  Classic rules and scenarios: thresholds, country lists, structuring patterns, specific trade-based money laundering red flags, invoice fraud transaction patterns, mule account detection scenarios, scam-driven transfer detection.
• machine learning in transaction monitoring
  Anomaly detection algorithms, supervised vs unsupervised AML models, behavioral analytics, recommendations for alert prioritization and reduction of false positives.

• how AML model risk management is implemented;
• whether there are procedures for AML model validation for transaction monitoring;
• what audit trail and AML documentation exist;
• how data quality issues in transaction monitoring are addressed.

Calibration and threshold testing

The second critical area is AML transaction monitoring calibration:

• AML alert thresholds optimization;
• tuning suspicious transaction monitoring scenarios;
• above the line / below the line testing AML;
• AML scenario effectiveness testing.

• thresholds and scenario parameters do not match a real risk-based approach;
• there is no regular scenario library management and scenario coverage assessment;
• there is no functioning AML continuous learning feedback loop from analysts to rule owners.

Governance, KPIs and working with the business

A working AML transaction monitoring function is not only about technology and scenarios, but also about proper governance:

• AML alerts governance framework;
• the three lines of defence model in AML;
• governance of the financial crime function and financial crime committees;
• regular internal audits of transaction monitoring and independent validation of AML systems;
• regulatory inspections and reviews, preparation for inspections and addressing findings.

For the board and senior management, the following are important:

• key risk indicators (KRI) for AML;
• management information (MI) for AML;
• service level agreements (SLA) for alert handling;
• team workload and resource planning for AML teams;
• AML transaction monitoring ROI and cost of compliance vs cost of non-compliance.

What entrepreneurs and CFOs can do now

I’ll list practical steps that significantly reduce the “pain” of AML monitoring for operating businesses and are almost mandatory when launching new projects in Europe and Asia.

How to map your business model to AML

For a bank, your business is a set of risks, not just revenue. The task is to help the compliance team understand you.
I recommend preparing:

• a description of the business model with a focus on payment flows;
• customer segments, customer risk rating by groups;
• typical volumes, currencies, geography, expected transaction pattern;
• a list of high-risk industries if you work with them (gaming, gambling, cash-intensive, high-risk MCCs);
• group structure, ultimate beneficial owner (UBO) screening, complexity of corporate structure and use of virtual office / co-working addresses.

Transparency of banks and providers

Even large international banks often hide the logic of scenarios behind the formulation “required by the regulator”.

• discuss transaction monitoring common red flags and typical scenarios that trigger for your business;
• ask for examples of frequent AML alert scenarios in transaction monitoring for your type of business;
• clarify how the bank uses name screening vs transaction screening, sanctions screening and transaction monitoring, adverse media screening and PEP checks.

Invest in an internal AML function

For licensed companies (payment institutions, EMI, forex, crypto platforms, neobanks) this is a mandatory requirement of regulators in Europe and Asia.

• an in-house department + external COREDO support for complex issues;
• partial outsourcing of AML monitoring, where an internal compliance officer manages the provider;
• managed services for transaction monitoring, if the business is not ready to build a large team.

Data and IT landscape quality

Even the most expensive AML platform is powerless if:

• data sources are not synchronized;
• there are gaps in KYC, UBO, geodata, IP, device;
• there is no control over data quality issues in transaction monitoring.

• analysis of data ingestion and data mapping;
• checking data quality controls and completeness checks;
• the need for data enrichment (IP, device, geo), device fingerprinting in fintech, IP address risk indicators, geolocation risk scoring.

How to choose a jurisdiction and a license

choosing a jurisdiction for a holding or a financial license directly affects which AML transaction monitoring regulatory expectations you will have to meet.

• the EU (including the Czech Republic, Slovakia, Cyprus, Estonia, Latvia, Lithuania, Poland, the United Kingdom, etc.);
• Singapore, some Asian and Middle Eastern jurisdictions;
• CIS countries.

• local typologies from regulators and industry bodies;
• expectations for transaction monitoring in cross-border payments;
• requirements for governance of the financial crime function and the resource intensity of the AML function;
• scalability prospects: AML monitoring for multi-jurisdictional business, synchronization of rules across different countries.

How does COREDO help in practice?

• support for the launch of fintech projects and payment institutions in the EU;
• registration and support of crypto platforms and VASP;
• configuration of AML monitoring for neobanks, including real-time transaction monitoring alerts;
• optimization of existing monitoring systems for international holdings operating in Europe and Asia.

The approach is always the same:

1. We understand the business model and the real risk exposure.
2. We build the architecture of the AML/CTF function and a risk-based approach.
3. We help select and implement a technological solution (including cloud-based AML platforms, API-based integration with core banking, data lakes for AML analytics).
4. We configure scenario design, threshold setting, above/below the line testing.
5. We build governance, MI/KRI, escalation processes and interactions with the regulator.
6. We stay close as a long-term partner: we update scenarios, support during audits, and help adapt to new markets and products.