Transaction monitoring is the ongoing process of reviewing and analyzing customer transactions to identify suspicious activity and ensure Compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. This Monitoring involves evaluating financial behavior in real time or retrospectively to detect anomalies, such as unusual payment patterns, large cash transfers or dealings with High Risk Jurisdictions or sanctioned entities.

Financial institutions and other regulated entities use transaction monitoring systems to automatically flag potentially suspicious transactions based on risk-based rules and thresholds. Alerts generated by these systems are then reviewed by compliance teams to determine whether further investigation or the filing of a Suspicious Activity Report (SAR) is necessary.

Effective transaction monitoring helps organizations detect Money Laundering, Fraud and other financial crimes, while also meeting regulatory expectations. It is a key component of ongoing due diligence (ODD) and a critical control in a robust financial crime prevention framework.