What is transaction monitoring in 2023?


The traditional focus of transaction monitoring has been to help regulated firms in the banking and finance sector to detect and prevent money laundering.

While this is still hugely vital today, evolving criminal typologies, a growing attack surface and regulatory developments are moving transaction monitoring compliance goalposts considerably.

In a recent post by Sentinels, the company outlined how this form of monitoring is evolving today and some of the technology surrounding it.

The company explained, “Transaction monitoring is a mandatory process for regulated financial institutions in most jurisdictions, and it has been for many years. But not all transaction monitoring processes have been created equally.

“Firms that are using old-school processes that are human-led and require lots of manual intervention, for example, will find that their transaction monitoring is costly, resource-intensive, and prone to triggering false positives.”

In the opinion of Sentinels, however, it doesn’t need to be this way – as modern monitoring software and tools have been created to help businesses eliminate many of these pain points.

Enter transaction monitoring software. This form of monitoring software helps regulated firms to automatically spot suspicious transactions, such as unusual account activity or large cash deposits, and reduces the need for human oversight and intervention.

Sentinels said, “With the support of technology and AI, modern software can spot things that humans simply cannot and detect suspicious activity much more quickly than even the most effective compliance teams.

“This is made possible through data. Transaction monitoring software analyses every single data point that’s connected to a particular transaction and compares them to defined risk rules.”

The system from the software then automatically flags suspicious activity such as unusual transactions, transactions that exceed a defined value, funds with unknown sources, large cash deposits or withdrawals and transfers to or from flagged accounts.

Sentinels concluded, “If the flagged transaction breaks certain risk rules (i.e., it’s completely unusual and there’s no explanation for it) the data that’s attached to it will typically be compiled in a SAR and submitted to the relevant local authority who can then carry out their own investigation.”

Read the full post here.

Sentinels recently launched a new platform solution designed to help financial institutions detect and eliminate financial criminality faster.

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