Traditional approaches to due diligence are fundamentally ill-equipped to handle the speed and sophistication of modern financial crime. In the face of evolving AML/CFT (Anti-Money Laundering and Counter-Financing of Terrorism) risks, where illicit funds can move across borders in hours, and corporate ownership can be restructured overnight, relying on periodic reviews is a critical vulnerability.
This is why regulators, including the Monetary Authority of Singapore (MAS), are mandating a shift to dynamic compliance, which is known as Active Entity Monitoring (AEM). It’s no longer optional but necessary for transforming compliance into a proactive, “always-on” process vital for mitigating regulatory and financial risk.
The Failure of the Single-Point Snapshot
The main risk of relying on static due diligence checks is the inherent lag time. A detailed, resource-intensive review conducted today can become outdated tomorrow. This outdated model creates critical vulnerabilities for several key reasons:
- Exposure to sudden risk: Annual or periodic checks may leave organisations exposed to sudden and critical changes in a counterparty’s risk status. For example, a company might onboard with a clean record, but if its ownership changes within a few months, the institution may unknowingly handle illicit funds.
- Complex deceptions: Sophisticated entities may exploit this lag time. They use complexity and timely manoeuvres (such as sudden changes in directorship or ownership) to evade static compliance reviews. This proves that an effective AML transaction monitoring system requires intelligence beyond just examining transaction amounts.
- Increased penalties: Regulators are increasingly scrutinising the maintenance of ongoing relationships. Institutions are being penalised not just for inadequate initial vetting, but for failing to employ active monitoring and detect risks that emerged later. The regulatory expectation has moved toward continuous monitoring throughout the entire business relationship lifecycle.
The limitations of the single-point snapshot confirm that a reactive approach is unsustainable in the modern regulatory environment. To bridge the gap between periodic checking and perpetual vigilance, organisations must adopt a dedicated, automated defence system. This is where Active Entity Monitoring (AEM) comes in.
The Mechanics of Active Entity Monitoring (AEM)
Active Entity Monitoring (AEM) defines a system that uses automated intelligence to track changes in specific, high-risk indicators associated with corporate entities and individuals. So, what is active monitoring? It’s an automated defence mechanism designed to notify teams the moment a profile changes.
This automated vigilance extends beyond traditional transaction monitoring and incorporates granular corporate intelligence:
- Crucial AEM triggers: AEM tracks a wide array of critical corporate and financial indicators. These include changes in Ultimate Beneficial Ownership (UBO), new litigation or enforcement actions, or changes in legal status (e.g., liquidation). Handshakes’ AEM system provides alerts on specific, structural changes across multiple dimensions:
- Entity Information Changes: Tracking updates to the company’s active name, address, place of incorporation, entity status, or primary/secondary business activities.
- Financial Data Changes: Monitoring crucial shifts in financial health, such as changes in total assets, liabilities, equity, revenue, or profit metrics. Alerts are also generated for changes in the independent auditor’s report date or Emphasis of Matter indicators.
- Capital Information Changes: Alerting teams to critical adjustments in capital currency, capital amount, or the number of allotted shares, which often signal significant operational shifts.
- Instant alerts and action: A robust AML monitoring software provides instant alerts on these triggers, allowing financial institutions to take immediate, defensive action, such as freezing suspicious transactions, adjusting internal risk scores, or initiating enhanced due diligence, preventing potential breaches before they escalate.
- Integrated intelligence: Effective AML monitoring requires systems that look at both the behaviour (transaction monitoring) and the structure (entity monitoring) of the counterparty. An active monitoring system ensures that structural changes are instantly incorporated into the risk score.
Handshakes: Enabling Dynamic, Continuous Compliance
Handshakes provides the essential data infrastructure and technology to transform traditional processes into a dynamic AEM framework, setting a new standard for compliance among Singapore’s data companies.
- Handshakes APP (Mapping & Data): The Handshakes APP is fundamental to continuous monitoring. It provides real-time access to official registry data and uses its unique mapping capabilities to instantly detect changes across all connected parties. This includes automated alerts for shifts in shareholders (including category, share currency, and number of allotted shares), changes in investees, and updates to appointments (including appointee type and appointment title).
- Automated alerts: The platform allows users to set specific alerts on high-risk entities and relationships. These custom notifications ensure that users receive automated warnings the instant a risk event occurs, allowing risk officers to transition instantly from passive acceptance to active monitoring and investigation.
- Holistic risk profile: Effective AML monitoring requires looking beyond a single dataset. Handshakes enables a comprehensive, current risk profile by combining real-time registry changes with enforcement data (via the RED list) and adverse media intelligence. This integrated approach is critical for risk mitigation and due diligence procedures.
Future-Proofing Compliance and Operations: The Benefits of AEM
The strategic adoption of Active Entity Monitoring (AEM) provides benefits that span the entire organisation, solidifying compliance and creating operational efficiencies.
- Drastic risk reduction: AEM provides a proactive stance that is invaluable in protecting the firm from regulatory action. By automating vigilance, it drastically reduces exposure to financial crime risks, effectively eliminating the exposure gap created by static, manual, periodic reviews.
- Operational efficiency: Automation replaces resource-intensive manual review queues for ongoing monitoring, freeing up highly skilled compliance analysts to focus their efforts on complex investigations rather than routine checks. This is the difference between performing background screening in Singapore manually versus automatically.
- Strategic value: AEM is far more than just a compliance cost; it’s a strategic conflict-check software. It provides continuous, validated intelligence that supports safer, more informed decision-making across the entire business, from customer onboarding and transaction monitoring to portfolio risk management.
Securing Your Place in the Future of AML/CFT
The transition from outdated, static due diligence to dynamic, continuous monitoring is both a regulatory mandate and a crucial competitive advantage. Handshakes empowers financial institutions and corporates to embrace Active Entity Monitoring (AEM) through authoritative data access and advanced technology.
By partnering with Handshakes, you gain the technological agility to eliminate the exposure gaps created by manual reviews. Secure your place in the future of AML/CFT compliance to ensure your operations are resilient, transparent, and always on guard against evolving financial crime risks.
