Businesses need to be able to access information about complex or suspicious transactions and the related sources of funds. Otherwise, there is a risk of fines, penalties, and even license revocation. In 2021, Standard Chartered was fined $40 million for deficiencies in its compliance program, specifically transaction monitoring. Thus, firms must be able to protect themselves from becoming platforms for money laundering and other financial crimes by screening suspicious and contradicting information.

Transaction monitoring is performed by identifying suspicious events either in the customer’s financial history or in actions they are about to take. Every financial institution tasked with transaction monitoring has a set of rules, based on which suspicious or illegal activity is flagged for review. In some cases, this activity can be automatically prevented—such as transferring a large sum of money without providing a source of funds statement first. This process is done most efficiently with the help of AML transaction monitoring software.

Transaction monitoring in KYC allows detecting signs of suspicious user activity, such as money laundering, terrorist financing, fraud, identity theft, and more. In general, companies need to ensure that user transactions are consistent with their knowledge of the customer received during Know Your Customer (KYC) procedure. Transaction monitoring is required by any business that falls under AML regulations and deals with customer transactions. This mainly includes financial institutions such as banks, fintech companies, money services and more.

AML transaction monitoring is the process of screening customer transactions for signs of money laundering activity. This process involves the assessment of current and historical customer data, including transfers, withdrawals, and deposits, for discrepancies. Suspicious activity involves income from undeclared sources, the use of false social security numbers, and a large number of transactions under $10,000, among others.