Transaction monitoring is a common anti-money laundering (AML) compliance process that is designed to monitor customer transactions (transfers, withdrawals and deposits) to detect suspicious activity. It helps financial institutions and other companies that handle payments to assess customer data and build an overall picture of their behavioral activity. During monitoring, red flags can emerge, prompting further investigation to decide if the alert is a true or a false positive.
A transaction monitoring system is often automated to achieve better results and is designed to spot money laundering and other financial crimes. Banks, fintech businesses, and other regulated industries are required to implement this process, as well as report suspicious activities that are detected during this process.